ABSTRACT
This paper seeks to review the Flat Tax proposal and answer the question: ‘What factors ultimately determine whether or not the flat tax is a viable economic strategy for future economic growth?’ Many European economists identify the need for EU tax harmonization and point to the success of the flat tax in countries where it has already been implemented as evidence of its effectiveness. But the European commission and several leaders of the largest EU member states argue that the flat tax would be detrimental to EU tax strategy, as well as to the larger economic climate. Just as importantly, however, socio-political factors stand firmly in the way of the flat tax’s implementation in much of Western Europe. Now with decades-long histories of ensuring socioeconomic equity through relatively high, graduated taxes, many ‘senior’ EU member states are path-dependent and have copious sunk costs. Using the case studies of the Baltic countries, Russia, Ireland, and Greece, I conclude that social and political factors are largely ignored by economists who support the implementation of the flat tax in what would otherwise be a worthwhile effort to reform EU tax strategy.
