Jack Kemp

When I read the headline in The Washington Post that said, "Bremer imposes flat tax on Iraq," I thought how dare the administrator of the Coalition Provisional Authority "impose" a fair, simple, low tax rate on those poor Iraqi entrepreneurs and small shop owners that will promote economic growth and prosperity and give them a chance to get rich without being crushed by taxes. Actually, L. Paul Bremer didn't even impose a single-rate flat tax; he simply ordered that "the highest individual and corporate income tax rates shall not exceed 15 percent," which is perfectly consistent with lower tax rates for lower-income individuals.

What audacity Bremer demonstrated, to achieve in Iraq something we have yet to accomplish in the United States - fundamental tax reform and simplification that has worked so well in Hong Kong for years and is working for Russia under President Vladimir Putin, who cut the top rate to 13 percent.

I only wish Bremer had sealed the economic deal completely by instituting a currency board to anchor the new Iraqi dinar to hard currency reserves or to a commodity base. I agree with Steve Forbes, who said in a recent Forbes Magazine editorial that putting the Iraqi central bank in charge of managing a new floating fiat currency is a prescription for monetary instability and debasement of the new Iraqi currency.

In 1996, I chaired the National Commission on Economic Growth and Tax Reform - the Kemp Commission. We concluded that the income tax system was "impossibly complex, outrageously expensive, overly intrusive, economically destructive and manifestly unfair." Despite the significant progress on capital gains tax relief, dividends tax relief and some modest improvements on individual income tax rates and business expensing and depreciation, the Internal Revenue Service code continues to tax income multiple times and penalizes work, saving, investing and entrepreneurial risk-taking.

When the Kemp Commission issued its final report, the headline in The New York Times read, "Failings of the flat tax." Similarly, Paul Samuelson wrote in Newsweek about "The flaky flat tax." In that article he maintained that Republicans were "peddling the illusion that a flat tax will ignite a burst of economic growth that will wash our hardest choices away." He smugly concluded, "It won't."


Jack Kemp

Jack Kemp is Founder and Chairman of Kemp Partners and a contributing columnist to Townhall.com.
 
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