According to Hoover Institution economist Alvin Rabushka, inflation-adjusted personal income tax revenues in Russia rose 28 percent the first year the flat tax was in effect, and 21 percent the following year. So far this year, real revenues are up about 17 percent. Revenues were flat or falling before the flat tax was imposed. Even the liberal New York Times took notice of the turnaround. A March 23, 2002, report was headlined: "Russia Imposes Flat Tax on Income, and Its Coffers Swell."
Here in the United States, Gov.-elect Arnold Schwarzenegger of California is said to be looking at some sort of flat tax there, according to an Oct. 30 report in the Los Angeles Times. Economist Arthur Laffer of San Diego, who has been pushing the flat tax for many years, is advising him. Laffer's principal argument is that progressive income tax rates cause too much volatility in the state's revenue collections. Revenues flood the treasury when times are good and crash when times are bad, encouraging excessive spending during the former and painful spending cuts during the latter. A flat tax, Laffer argues, would create more stable revenues over the business cycle.
While the flat tax has historically been a conservative issue, the fact that it has been adopted in several countries ruled by parties of the left shows that it cuts across ideological lines. The political experience here reinforces that view.
It is worth remembering that former California Gov. Jerry Brown ran on a flat tax in the Democratic presidential primaries in 1992, giving his campaign a big boost. According to Gallup, Brown's support rose steadily as he campaigned on the flat tax, rising from the low single digits to about 25 percent of the Democratic electorate, second only to Bill Clinton. Brown was also able to beat Clinton in primaries in Maine, Colorado, Vermont, Connecticut, Utah and Nevada. He was the only candidate able to challenge Clinton all the way to the Democratic convention.
I would suggest that Dick Gephardt is probably best positioned to duplicate Brown's success. He has already staked out a rightward position on Iraq and was a prime mover of tax reform in the 1980s, as co-author of the Bradley-Gephardt tax plan. I think he would generate a lot of excitement by endorsing a flat tax -- something his campaign desperately needs to challenge Howard Dean -- and give him a better shot at the Democratic presidential nomination. It has the added virtue of being good policy.