Guess What? The Flat Tax is a Good Idea!

Cato’s Dan Mitchell points us to this fantastic bit of news about economic growth in the former Soviet province of Georgia, which recently instituted a flat tax.

Effective January 1, 2005, Georgia (the country, not the U.S. State) adopted a flat tax of 12%, replacing its previous four-bracket system. The flat tax was augmented with a 20% tax on corporate profits, 20% on social insurance (reduced from 33%), and 18% (reduced from 20%) on VAT. The new, simpler system has had a dramatic effect on economic growth, averaging 10% a year for the past three years, and taxpayer compliance. Tax revenue increased from 14.5% of GDP in 2003 to 22% in 2006, and should reach 24% in 2007. Between 2003 and 2007, the reforms reduced the number of taxes from 22 to 7.

So under a modified flat tax system, revenues are up, growth is skyrocketing, and the whole system is simpler.  Small countries that are in the midst of major redevelopment obviously have an easier time instituting such reforms than the U.S. would, but America should take notice of the success seen in these countries.