Two-time former Estonia Prime Minister Mart Laar visited The Heritage Foundation today, extolling the benefits the flat tax brought to his country.
First passed in Estonia in 1994, Laar cited two immediate benefits he witnessed when the flat tax was implemented: First, government revenues went up as the simplicity of the new system “killed” tax avoidance; and second, growth skyrocketed. Indeed healthy economic growth has been a staple of the Eastern European countries that adopted the flat tax since the fall of the Berlin Wall, including Bulgaria, Latvia, Lithuania and Slovakia.
Laar said it was difficult to overcome leftist socialist sentiment against the flat tax in 1994, but that in the wake of ending Soviet rule in the country, lawmakers did find the rare political courage to make it possible. Once the economy took off, however, Laar said opposition to the tax all but vanished. Even in countries where leftist governments have won elections campaigning against the flat tax, like in Slovakia, legislators have failed to move back to the old corrupt system.
Asked why he thought the U.S. could not join Estonia in moving forward to flat tax system, Laar said there were just too many established groups with an interest in preserving the current loopholes to block it. He said found it odd that the U.S. president, who has been traveling the world telling people how wonderful the flat tax is, had never tried to implement the policy himself. Even when his party controlled both houses of Congress. “In the end, it is a question of freedom,” Laar said.