The percentage of wealth in flat tax states becomes incredibly top heavy. Take Hong Kong, with its 10% IIRC tax. It has the highest concentration of Rolls Royces, and one of the highest concentrations of beggers.
Essentially, though it sounds promising, those over a certain income just start amassing enormous wealth relative to the general economy, and there is very little way to redistribute it. The middle class disappears.
Sadly, stratified economies like these tend to be the most volatile, the most prone to both coups from the top and revolutions from the bottom of the economic strata (think much of South America).
By contrast, countries with progressive taxes that increase percentage-wise with income (like Scandinavia) tend to be the most stable and, perhaps more importantly, economically vibrant.
(no subject)
Date: 2007-05-23 04:45 am (UTC)Essentially, though it sounds promising, those over a certain income just start amassing enormous wealth relative to the general economy, and there is very little way to redistribute it. The middle class disappears.
Sadly, stratified economies like these tend to be the most volatile, the most prone to both coups from the top and revolutions from the bottom of the economic strata (think much of South America).
By contrast, countries with progressive taxes that increase percentage-wise with income (like Scandinavia) tend to be the most stable and, perhaps more importantly, economically vibrant.