Friday, February 20, 2009

Flat Tax Progress in January-February 2009


2009 is getting off to an auspicious start. Ricardo Martinelli, the head of Panama’s leading opposition party plans to implement a flat tax if he is elected president in the upcoming May 3, 2009, election. His party has stated it wants to cut the top 27% tax rate on individuals to a flat rate of 15%, or perhaps an even lower 10%. In exchange for broadening the tax base by eliminating incentives for specific sectors, the current statutory 30% corporate tax rate could also be cut to 15% or 10%.

In January 2009 Martinelli joined forces with Juan Carlos Varela and the Panameñista Party; Varela is running as Martinelli’s vice-presidential candidate. Balbina Herrera, their opponent in the ruling Revolutionary Democrat Party, opposes the flat tax on the grounds that it would eliminate the country’s multiple-rate progressive system. Polling data in February 2009 show Martinelli with 53% support, up from 44.3% in January.

United Kingdom

In late January 2009, Conservative Party leader David Cameron spoke about his vision for the United Kingdom at Demos (a Blairite think tank). If the Conservatives win the next national election that must be held by 2010, Cameron will become prime minister. During the question and answer period, he stated that flat rates of tax are more progressive than graduated rates, basing his belief on the experience of those Central and Eastern European countries which adopted the flat tax in the past 15 years. Apart from their gains in revenue and improved economic conditions which accompanied the switch to the flat tax, its enactment in Britain would also eliminate all the hassles to businesses and individuals due to excessively complicated tax laws.


On February 17, 2009, by a 9-6 vote, Oklahoma’s Senate Finance Committee passed a flat tax bill that would set the rate at 3.423% for all income brackets. If enacted, it would replace the current graduated rate system that taxes income over $10,000 at 7%. In exchange for the lower flat rate, the bill would broaden the tax base by reducing several deductions.

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