Quote:
Originally posted by broke
That wasn't the argument.
The argument was that a flat income tax rate of 15% would generate more in actual tax dollars collected than the current system.
That as that Russia has beaten the majority of the civilized world to the punch with its flat tax reform.
Bashing Russia is not exactly the most pervasive argument against a flat tax either.
Here are a few facts about the Russian tax system:
Since changing to the flat tax system on January 1, 2001, Russians have paid a 13% flat tax as opposed to paying the old rates of 12%, 20%, and 30%.
As of early 2002, the Russian government had seen a 28% in real ruble revenue.
In the three year period preceding November 2001 tax revenue had increase from 9-10% of the national GDP to 16%.
You can argue about higher revenues from and the societal benefits of a progressive tax system until you are blue in the face, but at the end of the day you'll still be wrong... but hey at least you'll have that blue face.
Government revenues increase upon the adoption of flat tax systems (that close tax loopholes) at lower marginal rates.
Read up on the Laffer Curve.
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The Laffer curve is so ridiculously simplistic that it is rather hard to take it seriously, let alone believe in it. Leaving out the influence of culture and especially the effects of diversity in taxes for different income classes is an unforgivable mistake.
While the Russian tax system indeed seems to give a strong argument for a flat tax rate, one should not forget that the situations are entirely different from eachother.
Russia is basically a third world country, with an inefficient and disorganized government - something that makes tax evasion a whole lot easier.
By taking away incentive for tax evasion and at the same time using an easy to enforce, simple system, it becomes easier for a disorganized government to actually collect taxes.
However, for a country with a strong government, the effects don't have to be the same at all... since tax evasion may well be a lot lower in the US than it was in Russia, a flat tax rate like the one used in Russia could very well lower tax revenue.