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Think outside the Box: Look to Other Nations on Tax Reform

by National Taxpayers Union - 01/09/08 4:04 PM ET

National Taxpayers Union Communications Manager Natasha Altamirano submitted this post as a guest blogger for The Hill.

House Ways and Means Committee Chairman Charles Rangel (D-N.Y.) has put a tax reform plan on the table that’s spurring debate on which direction to take the nation’s Tax Code. Instead of limiting itself to the menu at hand, however, Congress should look outside the box by looking outside America’s borders, where there’s a worldwide movement toward simpler, flatter tax systems.

In the mid-20th century, Hong Kong was the only country with a flat — and proportional — national personal income tax rate. Since then, 17 other countries have followed suit and introduced flat taxes, according to the World Taxpayers Associations (WTA), a coalition of 60 taxpayer-advocacy groups from 44 countries.

Bulgaria, Kazakhstan, Kyrgyzstan, Macedonia, Russia and Ukraine recently have introduced low, flat income tax rates ranging from 10 percent to 13 percent. Estonia, the first European country to institute a flat tax rate (in 1994), Lithuania and Hong Kong all have reduced their flat income tax rates in recent years. Jersey, Georgia, Guernsey, Iraq, Ireland, Latvia, Macau, Romania and Slovakia also have flat income tax rates ranging from 12 percent to 25 percent.

Meanwhile, in the United States, flat tax bills (H.R. 1040 and S. 1040) appear frozen in Congress, but can and should be thawed for consideration. A single-rate tax would create a more simplified and transparent Tax Code, but it need not take the form of an income tax. An alternative measure is a national sales tax, as proposed by Rep. John Linder (R-Ga.) and Sen. Saxby Chambliss (R-Ga.) in their “Fair Tax