January 17, 2008 8:05AM

Radical Economic Reform in Georgia

The nations of the former Soviet Union include some of the world’s most interesting free‐​market reformers. Estonia is famous for its laissez‐​faire approach, but Georgia deserves attention as well — and not just because I went to the University of Georgia (a different Georgia, I’ll admit, but let’s not get bogged down in details). A few years ago, it implemented a 12 percent flat tax. But it still had a problem of a very high 20 percent payroll tax rate, so Alvin Rabushka reports that Georgia has lowered the combined 32 percent flat tax/​payroll tax rate to 25 percent this year. But why stop there? According to the Wall Street Journal, Georgia now plans to lower the 25 percent tax rate to 15 percent over the next five years and also abolish the capital gains tax:

Newly re‐​elected Georgian President Mikheil Saakashvili wants to slash taxes, speed privatization, ease foreign‐​investment rules and tap international capital markets as part of a radical plan to shake up the economy of the Black Sea country, his prime minister said in an interview. “The state will basically do everything to support business and investments instead of standing in the way of it,” said Prime Minister Lado Gurgenidze… The government last week signed off on a proposal that would cut average income taxes to 15% from 25% over the next five years. Capital‐​gains taxes, currently at 20%, would be abolished altogether.