April 18, 2007 11:44AM

Estonia’s Flat Tax Leads to Economic Boom

In an article on the anti‐​growth American tax system, John Stossel notes that other nations have implemented simple and fair tax systems. Estonia’s low‐​rate flat tax has been particularly successful:

Other countries have made their citizens’ lives better by simplifying and lowering taxes. Estonians need an average 10 to 15 minutes to file their income taxes. Most do it without leaving their desk: 84 percent file online. … Unsurprisingly, Estonia is booming. The former Soviet republic used to be poor, with an average income 65 percent below its European neighbors. Today, Estonians are almost as rich as their neighbors, and their economy is growing more than 11 percent a year. Corporations like a tax system that is low and simple, too, and that leads them to do more business in flat‐​tax countries. American companies such as Microsoft, Colgate, 3M, Bristol‐​Meyers Squibb, and Johnson & Johnson opened businesses in Estonia after the flat tax was adopted. Twelve years ago, foreign investment in Estonia made up only 5 percent of GDP, but today, it’s up to 20 percent.