Some households save very little and will be ill-prepared to retire. Low saving has both personal and national economic consequences.

private saving-that is, saving by businesses and families-has averaged 4.9% since 1990. After averaging 8% of gross domestic product from 1950 to 1980, U.S.

Alas, while the new system would certainly be simpler (if it lasted), proponents of the flat tax are likely to be disappointed by the impact on saving.Ĭoncern about saving and growth is well-founded. Proponents claim the flat tax would be simpler than the current tax system, and would generate dramatic increases in saving and economic growth. As pushed by Steve Forbes, Richard Armey, the Kemp Commission and others, the flat tax would give each family a large exemption, tax all wage income above that level at a single, low rate and would exempt interest, dividends and capital gains from all household-level taxes. Others believe that not taxing the rich at rates higher than the poor will leave critical social institutions, such as schools and roads, underfunded.The notion of a “flat tax” has attracted increased attention and support in recent months. Many in the United States favor imposing a flat tax, at least in part, to encourage the rich to spend their money domestically rather than to keep it in tax havens. Imposing high taxes on the rich can cause them to set up offshore accounts in tax havens, as happened with The Beetles when the UK government taxed them at 95% of their income. However, there are arguments in favor of a flat tax, one being that not taxing the rich at high rates incentivizes them to remain in the country and spend their money there. Many of the countries with flat fees have lower standards of living than the nations that surround them. Hungary and Romania have flat taxes of 16%, and Lithuania and Georgia have flat charges of 20%. Similarly, Mongolia and Kazakhstan have flat taxes of 10%, and Bolivia and Russia have flat taxes of 13%, yet these countries do not have well-developed social sectors.

Nevertheless, Greenland has few of the social services that many developed countries have. Greenland, for example, has a flat tax, and at 45%, it is one of the world’s highest taxes.

The flat tax