Thursday, March 01, 2007

Iceland Joins Flat Tax Club

Iceland recently passed a flat tax rate of 22.75% for personal income at the federal level and 13% at the local level, for a combined flat tax rate of 36%, higher than flat tax rates in other countries (see chart above), but much lower than the previous marginal tax rate of almost 50% for high income earners. At the same time, corporate income tax rates were lowered in Iceland to a flat rate of 18%, down from rates as high as 50% in the late 1980s. As the Laffer Curve predicts, the lower corporate tax rates actually significantly raised corporate tax revenues collected by a factor of almost 2X, as a percentage of GDP (see graph above).

The move to a flat tax in Iceland is significant because it is the first advanced, Western economy to adopt a flat tax.

Iceland also now has the world's lowest unemployment rate for advanced economies at 2.1%.

Read more here from Cato Institute economist Dan Mitchell.


At 11/30/2009 8:56 PM, Anonymous the tax club said...

This is the new thing to do alot of countries and states are doing this


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