STANFORD—What does Russia—and 14 other countries—know that we do not? They have implemented the flat tax, a low, simple tax system to replace the complicated and costly tax programs that burden governments and taxpayers and slow economic growth. First proposed by Hoover senior fellows Robert Hall and Alvin Rabushka 25 years ago to replace the U.S. federal income tax, the flat tax has gone from being an idea to having been put into practice by 15 countries since 1994, with several more considering it, and several U.S. states.
To mark the occasion, the book The Flat Tax (Hoover Press, 2007) is being released by the Hoover Institution as the first in its new Hoover Classics series. The series will feature reissues of significant books published by Hoover Press that have shaped public policy and opinion.
The new second edition includes an introduction by Rabushka highlighting the success of the system in countries that have adopted it. These countries include Estonia, which now enjoys a budget surplus, and Russia, which, in the four-plus years since it has adopted the flat tax, has seen real ruble revenues, adjusted for inflation, more than double. In addition, the flat tax has been implemented in Latvia, Lithuania, Serbia, Ukraine, Slovakia, Georgia, Romania, Kyrgyzstan, Macedonia, Mauritius, Mongolia, Montenegro, and Iraq. Other countries considering a flat tax include Kazakhstan, Kuwait, Albania, and Mexico.
Although the flat tax system has been discussed in the United States since it was first proposed in 1981, Rabushka notes that, in the meantime, the U.S. federal government has further complicated its tax code with the alternative minimum tax. Several state governments however, including Colorado, Illinois, Indiana, Massachusetts, Michigan, and Pennsylvania, have implemented flat tax systems. Two more states, Rhode Island and Utah, have introduced optional flat tax systems.
Robert E. Hall is a professor in the department of economics at Stanford University. He is engaged in research on inflation, unemployment, taxation, and monetary policy.
Alvin Rabushka specializes in taxation, the federal budget, and economic development, especially in East Asia and Israel.
The Flat Tax
by Robert E. Hall and Alvin Rabushka
ISBN: 978-0-8179-9311-5 $14.95
228 pages April, 2007