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| *Ostroff, Fair and Company>>>Other Taxes |
Estonia has a flat tax rate for all incomes. Is this the best way? |
Estonia has a flat tax rate for all incomes. Is this the best way? I certainly think so. A flat tax is very fair - everyone gets hit by exactly the same proportion. graduated rates punish you for succeeding financially. Of course, some people think that financially successful people SHOULD be hit harder on their taxes - after all "they can afford it". Pretty bogus reasoning. Edit: dorioncanada - you think that a flat tax is unfair? I'm utterly baffled - could you explain why you feel that way? no of course not. if something as ridiculously unfair as a flat tax was any way to run a modern economy we wouldn't be talking about estonia. Definitely. It stops the rich getting richer and avoiding tax. It makes everyone pay their fair share and generates more money for the likes of unemployment benefit/ health care etc A further point...its not just Estonia that are using flat tax rates. Several European countries are using it and several others considering it, even Germany and Ireland No because it is disproportionately harsh on people with lower incomes. For example, if you earn $100,000/year, a 10% tax (which is $10,000) isn't that much to you because you still have $90,000 to live off of and $10,000 doesn't seem to be that much to you. If you earn $10,000/year, a 10% tax will cost you $1000. This $1000 leaves you with $9000 to live off of and the $1000 seems like a lot more to this person. Looking at this another way, if you have $5, donating $1 to charity seems like a lot of money. However, if you have $100, donating $1 to charity doesn't seem like anything. The value that people put on money depends on how much they have. Therefore, a progressive income tax system, not a flat tax system, makes a lot more sense. Romania has a glat tax rate too starting 1 January 2004 and we had some problems balancing our budget in the first year of applying such a system !!! Estonia was the first country from the Soviet collapse to have a viable economy. Estonians loathed Communiism and were more than ready to survive on their own when they became a nation again, unlike so many other Soviet Bloc countries. My best friend's brother married a girl from Estonia he met there while on a mission trip. They lived near Talin for a couple of years, then moved back to the U.S. about 5 years ago. Now they have decided to permanently move the family back to Estonia. They feel Estonia has less social problems and a strong economy with a fair and effective tax system. If you do a little research you will see that their system is working well, as opposed to our wasteful and unfair system. It sounds very nice and fair and several sophisticated folks like Steve Forbes support it for the US. Many state income taxes in the US are close to a flat tax. The problems are that economies rely on the tax system already in place. A significant change in the tax system would have a significant short-term impact on the economy. If improperly designed, it could have a significant long-term impact on the economy. What is Estonia's expectation for the flat tax in the short and long term? Is it adaptable as their economy changes, matures, grows, shrinks? Is it responsive to a changing global economy? |
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