July 13, 2006
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Laar
One of these summer days, I might get to go sailing.
Stanek: We have some debate in the United States about our
income tax system and other taxes. If you had a room full of
congressmen and senators here, what would you tell them about the flat
tax?Laar: I think nearly all of them know it is a good
thing. When you look logically at how the tax works and at the current
tax system in the United States, it is very hard to find anyone who is
satisfied with it. The problem is, even when the people know the flat
tax is a good idea, it looks like the politicians are afraid to do it.
This is because they are afraid to lose the wealth; they are afraid to
lose the power; they are afraid of the discussion.It’s quite radical reform. There are influential groups in the
United States who are against this kind of reform, starting with tax
lawyers. This is one group that would be out of a job if you could do
your taxes on a postcard. Last year in Estonia, 83 percent of people
did their taxes electronically, and it took from five to 20 minutes for
each of them. So you don’t need tax lawyers or a big tax bureaucracy.
Estonia Creates an Economic Miracle A conversation with Friedman Prize winner Mart Laar
Written By: Steve Stanek
Published In: Budget & Tax News
Publication Date: July 1, 2006
Publisher: The Heartland Institute
Mart Laar was barely 32 years old in 1992, when he became prime
minister of Estonia, a small nation on the Baltic Sea that had just
emerged from decades of Communist oppression as a satellite state of
the Soviet Union.He inherited leadership of a country with 1,000 percent inflation,
30 percent unemployment, and government-owned businesses that were a
shambles. Laar’s government removed price controls, cut regulations and
welfare programs, sold state-owned businesses, introduced a new
currency, and instituted a simple, flat-rate income tax that is being
emulated in countries across Central and Eastern Europe. The rate has
been lowered several times over the years and is now at 20 percent.The result? Inflation in Estonia has dropped below 3 percent,
unemployment has plunged below 6 percent, and foreign investment has
poured in. Estonia has enjoyed the greatest growth in real per-capita
income of any of the former Soviet states.
