On Nov 16, 2007, at 10:39 AM, Max B. Sawicky wrote:
> (I haven't read the Rogoff piece.) I don't know what kind of tax
> system China has now, but if you barely have one that works to
> begin with, in a developing country with a lot of destitute people,
> a flat tax is not a bad starting point. The zero bracket could
> eliminate the need for many to owe any tax. You can always add
> brackets, and you can also have a different rate on the business
> side of the tax (assuming we're talking about the classic Hall-
> Rabushka form of a flat tax). The initial form of it could be more
> progressive than what they have now. The context for its
> introduction is crucial to evaluating it. For any social-
> democratic system, as well as for the U.S., it would be a big step
> backwards. For other places, perhaps not.
I remember a Luxembourg Income Study working paper from long ago, which I now sadly cannot unearth, that showed that countries with more progressive tax systems are often the most unequal. Western European tax structures aren't terribly progressive - a VAT soaks the midrange - but the redistributive action really happens on the spending side (health insurance, child care, income support, etc.).
Doug