April 30, 2007

Flat tax? Just Peachy.

The great state of Georgia looks to supply side and the Laffer Curve to increase the state's competitiveness and revenue. Stephen Moore, writing in OpinionJournal Political Diary:

Just maybe, the model for a fundamental tax overhaul nation-wide has percolated up in the State of Georgia. On Wednesday, Glenn Richardson, speaker of Georgia's House of Representatives, filed a bill that would junk the state's existing tax code and replace it with a much simpler one.

Under the plan, all state and local property taxes would be eliminated. So would the estate tax, unemployment insurance and worker's compensation taxes, business and occupational fees, intangible taxes and insurance taxes. The entire structure would be replaced with a flat rate income tax of 5.75% and a flat 5.75% sales tax. The state's income tax is currently 6% and the sales tax is 4.5%.

The architect of the plan is the famous Reagan economist Arthur Laffer. "This would bring the focus of the entire country on Georgia," Mr. Laffer said in an interview. "States compete; they're like puppies bouncing around in a box at a pet store to get noticed. This is a way for Georgia to get noticed and set itself apart from all the rest of the states when it tries to sell itself to businesses and families."

House Speaker Richardson has been an ardent champion of tax reform in Georgia, which has become one of the reddest states in the nation. Georgia has a Republican legislature and, in Sonny Perdue, a Republican governor. "We must change the burdensome and antiquated tax system we currently have," Mr. Richardson says. He concedes that many business groups are likely to oppose the plan because it eliminates all the special favors, handouts and loopholes in the current Georgia code.

This plan would have to be approved by both houses of the legislature and then placed on the November 2008 ballot to be approved by voters. Mr. Laffer says the economic and jobs impact would be significantly positive because it increases "after-tax incentives to work, invest, produce and live in Georgia." Mr. Richardson adds: "I believe the House tax reform plan will be the talk of the nation." Who, knows the flat tax may finally get legs across America -- maybe even in Washington.

Economics and Markets Posted by John Kranz at April 30, 2007 1:02 PM