Citing Impact of Tax Competition, Former IMF Chief Economist (Reluctantly?) Endorses Flat Tax

Noting that over‐​taxation will cause the geese that lay golden eggs to fly away, the International Monetary Fund’s former top economist says that a flat tax may be the only sensible approach. This, of course, is precisely why groups like the Cato Institute and the Center for Freedom and Prosperity are fighting to protect tax competition. Resource mobility is the enemy of greedy politiicans. Unfortunately, those politicians are not giving up without a fight. They are working through international bureaucracies such as the OECD to get the ability to track — and tax — flight capital. American lawmakers should resist this effort, both because the US is the world’s largest tax haven for foreign capital and because it is the right thing to do:

Many super‐​earners are also super‐​creative and bring enormous value. Places like the United Kingdom actively court wealthy foreign nationals through extraordinary preferential treatment of their investment income. The ultra‐​rich are an ultra‐​mobile group, too. If you are earning $540,000 an hour, it does not take too long to save up to buy an apartment, even in London. Anyway, there are limits to how much tax pressure the political system can apply to the ultra‐​rich. …Rather than punitively taxing wealth, globalization strengthens the case for shifting to a flat tax on income (or better yet consumption) with a moderately high exemption. Aside from the usual efficiency arguments, it is just going to become increasingly difficult and costly to maintain complex and idiosyncratic national tax arrangements.