Albania teaching U.S. how to handle economy?

By Art Moore


Steve Forbes speaks at closing banquet of FreedomFest conference Saturday night (WND photo)

LAS VEGAS – Eight years after Steve Forbes ran a second presidential campaign pressing for a flat tax, the Internal Revenue Service is bigger than ever, but an economic revolution employing his idea is under way in at least 25 countries, including many of the former communist nations of Eastern Europe.

The success of the flat tax in seemingly unlikely places such as Bulgaria and Albania – which both have a 10 percent rate on personal and corporate income – may turn out to be the catalyst for change in Washington.

Forbes, a speaker at the annual libertarian-oriented FreedomFest conference last weekend, told WND he sees a message in the adaptation of a single marginal rate by nations formerly under Soviet rule or domination, such as Latvia, Estonia and Romania.

“It demonstrates those who have suffered under totalitarianism want to remove all the barriers to moving ahead, so they don’t get hung up on obsolete ideologies or misunderstandings,” said Forbes, president and CEO of Forbes and editor-in-chief of Forbes magazine. “They want to know what works. The flat tax does, which is why 25 countries have done it, and there are more coming along.”

Forbes, who is advising presumptive Republican presidential nominee Sen. John McCain, asserted “eventually the U.S. will catch up to the rest of the world,” predicting adoption within five years.

Americans want a flat tax, he said, “they just don’t think it can happen.”

“So you’ve got to overcome the way that we’ve been beaten down over the years,” he said. “The more countries that do it, the more people realize, ‘My goodness, this is doable. Why not do it here? If Albania can do it, why can’t America do it?'”

Forbe said he believes that as the rest of the countries in central and Eastern Europe adopt it, eventually a Western European nation “will do it, and then the U.S. will follow suit.”

Svetla Kostadinova, head of the Bulgarian think tank Institute for Market Economics, explained in a FreedomFest session how she helped launch a campaign for the flat tax in her country in 2004 when the top personal income rate was 29 percent, in addition to a pension and health care tax of 42 percent.


Steve Forbes on panel at FreedomFest conference (WND photo)

Kostadinova said that after freedom from communism in 1989, Bulgarians thought they would be on the road to prosperity along with the rest of the capitalist world but, instead, became wracked with hyperinflation as high as 2,000 percent.

Her group produced an alternative budget using the flat tax to demonstrate to lawmakers it could be done if accompanied by a reduction in spending and certain reforms. Bulgarian lawmakers also became aware of the fact they were at a disadvantage attracting investors as regional neighbors Serbia, Romania and Albania introduced a flat tax.

Now, Bulgaria is experiencing 6 percent annual growth, similar to other flat-taxers in the region, and just 6 percent unemployment – down from 12 percent three years ago. Kostadinova also pointed to record number of Bulgarians starting their own companies.

“Of course there are a lot of problems, but this is a proven idea and a clear incentive for people to risk, to invest, to be entrepreneurs,” Kostadinova said.

Forbes advocates the U.S. begin with a 17 percent personal and business rate, with “generous exemptions on personal income,” so that a family of four, for example would pay no tax on the first $46,000 and only 17 percent above that.

“The key thing is no tax on savings and no death taxes,” he said. “I believe you should be allowed to leave the world unmolested by the IRS.”

‘We have to do it’

Another FreedomFest speaker, Club for Growth co-founder and Wall Street Journal editorial writer Stephen Moore, told WND he believes the U.S. will adopt a flat tax within five years at a rate below 20 percent

“We have to do it,” he said, “because the world is cutting rates, and if we want to maintain America’s competitive edge, we have to have low tax rates in this country. We’ve got to get government spending under control, we’ve got to get our dollar strong again.”

Moore predicts doom, otherwise, particularly if Obama is elected.

“I think that if we continue to raise tax rates – if we do anything like what Obama wants to do – our entire income tax system is going to collapse,” he said.

He sees some support for a flat tax on Capitol Hill, from the likes of Rep. Paul Ryan, R-Wis., and Sen. Jim DeMint, R-S.C., but he thinks citizens need to seize the initiative.

“I think it’s one of those ideas that will be generated from the grass roots up,” Moore said, “where the politicians will follow, they won’t lead, and the voters will be the leaders on this, demanding a whole tax system that works for America and creates jobs.”

The economy may get so bad that politicians will be forced to make a move, he said.

“Look, why would anybody want to start a factory or business in the United States and pay 60 percent taxes when they can go somewhere else and pay 15 percent taxes? It doesn’t make any sense.”

McCain adviser

Forbes said his days as a presidential hopeful are behind him, and he doesn’t expect an invitation for a prominent position in a McCain administration, saying he’s happy to continue as an “agitator” and offer the Arizona senator a free subscription to his magazine.


Steve Forbes on panel with Cato Institute Executive Vice President David Boaz at FreedomFest conference (WND photo)

Forbes, asked about his currrent role as a McCain economic adviser, told WND he believes that in the past week the Republican candidate has “really started to get it right on taxation.”

Forbes said McCain is starting to hit on the themes he hopes the senator will emphasize in the fall: taxes, energy and a sound dollar.

“I think the more he does it, the more he will persuade the voters this would be a truly new administration, a positive change and not just a change for change’s sake,” Forbes said.

The key issue, he said, is lowering tax rates and simplifying the tax code.

“Not only will it be an enormous benefit to the economy and opportunity for people, it will also remove one of the principle sources of corruption in Washington, as the lobbying revolves around the tax code in one way or the other,” he said.

Asked what McCain thinks about his flat tax proposal, Forbes said the senator is “open for simplification” of the tax code.

“He’s endorsed the idea of giving people a single-page tax form with two rates instead of one,” Forbes said. “But two is going in the right direction. No deductions, low rates, but you make the choice.”

With that system, Forbes said, “we get around the debate of who’s going to lose what on deductions and let everyone make their own choice.”

WND asked Forbes whether he has any reservations about the economic philosophy of a senator who has employed the Democrats’ class-warfare rhetoric, railing, for example, against the “obscene” profits of oil companies. And although McCain recently has explained he voted twice against Bush’s tax cuts, in 2001 and 2003, because the measures didn’t include spending cuts, he also argued they disproportionately benefited the wealthy.

Forbes replied simply, “I think on taxes, he gets it.”

“We should remember he’s been a leader on banning Internet taxes going back to the 1990s, leading a bipartisan effort on that,” Forbes said. “And he’s now got a tax program.”

Forbes added McCain has always been an advocate of reducing the corporate tax rate.

“So on the personal side, I think he gets it,” McCain said. “And given the fact that he has always been a hawk on spending restraint, I think you’ve got a good combination, tax cuts, spending restraint and not the Bush disaster that’s so demoralized the party and the country.”

 

 


Art Moore

Art Moore, co-author of the best-selling book "See Something, Say Nothing," entered the media world as a PR assistant for the Seattle Mariners and a correspondent covering pro and college sports for Associated Press Radio. He reported for a Chicago-area daily newspaper and was senior news writer for Christianity Today magazine and an editor for Worldwide Newsroom before joining WND shortly after 9/11. He earned a master's degree in communications from Wheaton College. Read more of Art Moore's articles here.