Estonia

Images_16John Tierney’s editorial in the NYTimes Tuesday was really interesting.  He wrote of Estonia’s success story.  How Estonia transformed  itself after breaking off from the Soviet Union.

Mark Laar, a former prime minster and history teacher took office after Estonia was liberated.  He was only 32 years old.  He had just finished reading "Free to Choose" by Milton Friedman which is a book on economics.  Laar liked what he read and particularly liked that the Soviet Union hated Friedman.  So, he decided to take those theories and put them to use in Estonia.

Since the country was young and he was politically naive, he went for it.  He basically abolished almost all tariffs, welcomed foreign investment and privatized most of the Government functions.  He did this with the help of his privatization czar who used to be the manager of the band Abba.  I love that part.  He cut taxes on businesses and individuals and instituted a flat income tax of 26%.

What happened?  A budget surplus.  It was easy to do business there.  Foreigners came in and provided jobs.  Entrepreneurs found it easy to create new businesses. 

From a individuals stand point, there is no reason to find tax shelters.  Everyone pays 26% of what they make.  The more you make, the more you earn but you pay the same in taxes.  This certainly doesn’t help the rich but if anything makes it a more fair playing ground.  Less corruption too because people can’t find a way to hide their income.  Pretty damn smart.

Laar has started something.  His neighbors are starting to adopt the same philosophies.  I wish the US would take a look at this.  The rich pay less taxes because with the help of good tax lawyers you can pay less taxes by finding the right shelters, investments etc.  The middle class always get screwed. 

How about if you make less than $25 – 30,000 a year you don’t pay a dime in taxes.  Or whatever the US Government decides is the right number.  Anything over that you pay a flat tax on earned income.  Something has got to change.  The Bush Administration has created such a divide among the classes.  The rich has just gotten richer and everyone else has become poorer.  The next Administration needs to think out of the box and make some major changes or our country will never regain our good reputation overseas and we will lose our power and edge in the International world. 

I just hope it isn’t too late.