Josh Barro, Columnist

A Euro-Exit for the Flat Tax

As Europe's economic troubles continue, some eastern European countries are reconsidering their flat taxes -- for good reason

May 16, 2013 at 2:30 PM UTC

By Josh Barro

Josh Barro is the lead writer for the Ticker, Bloomberg View's blog on economics, finance and politics. His primary areas of interest include tax and fiscal policy, state and local government, and planning and land use. Previously, Barro was a Senior Fellow at the Manhattan Institute for Policy Research and a commercial real estate banker at Wells Fargo. He holds a bachelor's degree in psychology from Harvard and lives in Queens, New York.

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Bloomberg Businessweek's Carol Matlack reports that several central and eastern European countries that adopted flat-rate income taxes over the last two decades are now abandoning them or considering doing so. The Czech Republic and Slovakia switched last year to progressive systems, where rates get higher as incomes rise. Now, Bulgaria is considering a similar move.

This makes sense, because flat taxes were never what they were cracked up to be. The flat tax is usually sold as a simplification tool, but multiple tax rates aren't what make tax systems complex. Rather, it's rules about what goes in the tax base that complicate things. And most "flat-tax" systems aren't really single rate anyway; they generally include personal exemptions that create a bracket of income taxed at a rate of zero.