Friday, November 14, 2008

A Bulgarian Economic Model for America

Ideologues are in charge of Congress. Our fear is that Barack Obama may govern ideologically along with them and take us over the cliff into poverty, oppression, social breakdown and perhaps even attack from abroad. The definition of an ideologue is someone who holds to his theories despite all the evidence to the contrary from experience.

Well, when Congress comes to consider President Obama's 2009 tax bill, and when at the same time the voting public considers Congress, we would all do well to consider the recent experience in Bulgaria with a flat tax. Richard Rahn explains it in "Lessons From Abroad" (Washington Times, October 8, 2008).

Can you name a country that has a flat 10 percent income tax on both personal and corporate income, and that is also running a budget surplus of 8 percent of gross domestic product (the equivalent of the United States running a budget surplus of more than $1 trillion)? The surprising answer is Bulgaria, formerly one of Europe's most backward countries. Most of the former communist countries of Eastern and Central Europe have instituted flat-rate income tax systems. Estonia was the first, and Bulgaria is one of the most recent, having only moved to the 10 percent flat rate at the beginning of this year.

Rahn reports on the Bulgarian banking system as well as on how the Bulgarians are weening themselves off their highly inefficient government health care system. (Having said "government system, did I need to say "highly inefficient?")

"This year, the Bulgarian economy will grow about 4 times faster than the average of the European Union (of which Bulgaria is a member)."

Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth. It was my colleagues in economics at the King's College, Alex Tokarev, a Bulagrian ex-pat, who brought this news to my attention.

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