Flat taxes get more absurd by the day, and the injustice they create increases. Take the new Czech proposal as an example. The claim is that they will have a 15% flat tax. Well, that's not true.
As MSN reports, it's not a flat tax because the corporation tax rate is to be 19%. That blows the theory apart.
Worse though, for employees the tax will operate on their gross pay INCLUDING employer's social security contributions. This does, I suppose, recognise the fact that economically these are borne by labour anyway, but as MSN reports, the consequence is an effective flat tax rate of 23% on average. How is that possible? Well, employer's contributions in the Czech republic are 35% on top of 12.5% paid by the employee.
Now, I can only make the 23% work if the comparison is being made with a 15% rate on earnings after employee social security contributions, so I suspect MSN (and the FT from whom they got this story) have this calculation wrong. But the real 'flat' tax rate on earned income is over 20% on the basis of what I think to be correct assumptions, in addition to which there is 12.5% social security, or about 33% in all. Investment income will instead qualify for 'flat tax' at 15%.
So much for flat taxes.
It really is time the press stopped calling them by this name. They are a con trick. They are neither flat, or low rate, or simple. At which point none of the claimed advantages of them exist. Unless your objective is to shift the burden of tax onto working people, for which they are excellent.