Lessons from Abroad

Copenhagen Institute -

SOFIA, Bulgaria. Can you name a country that has a flat 10 percent income tax on both personal and corporate income, and that is also running a budget surplus of 8 percent of gross domestic product (the equivalent of the United States running a budget surplus of more than $1 trillion)? The surprising answer is Bulgaria, formerly one of Europe's most backward countries.

Most of the former communist countries of Eastern and Central Europe have instituted flat-rate income tax systems. Estonia was the first, and Bulgaria is one of the most recent, having only moved to the 10 percent flat rate at the beginning of this year. The flat rate for Bulgaria was first proposed by exceptionally talented young economists affiliated with the Institute for Market Economics (IME), the country's leading free-market think tank.

Economists in the Finance Ministry claimed that such a drastic cut in ......