Flat Tax World

Daniel J. Mitchell, of the Cato Institute, argues at American.com that tax competition is coming to a country near you:

The world has changed. Today, spurred by tax competition, there are now 16 jurisdictions that have some form of flat tax, and two more nations are about to join the club. With the exception of Iceland and Mauritius, all of the new flat tax nations are former Soviet Republics or former Soviet Bloc nations. This is a sign of tax competition in the region, and shows that people who suffered under communism are less susceptible to class-warfare rhetoric about “taxing the rich.”

Tax competition works the same way competition always works; it makes the participants more efficient. Governments have been mostly immune to competition, primarily due to closed borders and immigration limitations. But with the internet and the formation of the EU, those impediments are less onerous. Workers and companies can migrate to jurisdictions with favorable tax climates - and they do.