'Time' Trashed Flat Tax in 1996, Now Sees Flat Tax Boom In Eastern Europe

January 15th, 2007 3:08 PM
More than a decade after publisher Steve Forbes’s flat-tax platform temporarily vaulted him to the top of the pack of GOP presidential candidates, another prospective Republican presidential candidate is making tax simplification a centerpiece of his 2008 campaign. In announcing his exploratory committee, Kansas Senator Sam Brownback argued “We need a flat tax instead of the dreadful, incomprehensible tax code we now have,” today’s Wichita Eagle reported.

But unlike back in 1996, the media are now confronted with the evidence that the flat tax help boost wealth-producing economic growth. This week’s "Time" reports on the economic boom in the former Soviet republic of Estonia, which like many Eastern European countries has seen its fortunes rise since dumping socialism and instituting a flat tax. “The economy is now one of Europe’s most dynamic, racing along at an 11.3% growth clip,” Peter Gumbel writes this week in his “Letter from Estonia.”

Nearly eleven years ago, "Time" took dead aim at Forbes’s flat tax in a January 29, 1996 cover package, “Does the Flat Tax Make Any Sense,” an issue which hit mailboxes right before the New Hampshire primary.

Senior Editor Nancy Gibbs perfectly echoed the liberal establishment’s disdain for both the flat tax and conservative economic theories. “The heart of his [Steve Forbes’s] fiscal crusade is his flat tax, a plan derided as ‘deja voodoo’ by economists who blame Reagan’s supply-side tax cuts for the explosion of the national debt. He has captured perfectly the fury Americans feel for a system they think treats them like suckers while the rich enjoy a secret tax code written just for them — not withstanding his flat tax could favor the rich even more effectively.”

“The scheme Forbes is pushing in his television ads looks as if it would either swell the federal deficit or raise taxes on middle Americans while bestowing extra riches on the rich,” echoed "Time" writer Dan Goodgame in a second piece headlined, “Is This Flat Tax Unfair?"

Fast forward to this week’s "Time," which reported on the innovative and booming Estonian economy, without mentioning that U.S. taxpayers have to deal with a much more cumbersome system with far higher top rates. In fact, the biggest problem in Estonia seems to be an unemployment rate so low, the country is worried about a labor shortage. An excerpt of Gumbel’s letter:
Since regaining independence in 1991 with the collapse of the U.S.S.R., Estonia (pop. 1.35 million) was the first former Soviet republic to introduce its own currency and adopt a flat-tax system, now widely copied in the rest of Eastern Europe. It has also become one of the most technologically advanced places on the planet. You can use your mobile phone to pay for parking, buy bus tickets or check your children's school schedule. Wi-fi hot spots are ubiquitous, and the nation's most famous start-up is Skype, the Internet phone titan, which eBay acquired for $2.6 billion. That's slightly more than the annual output of the entire Estonian economy 15 years ago.

The economy is now one of Europe's most dynamic, racing along at an 11.3% growth clip. Estonia is the only new European Union member to have a budget surplus, and its national debt is shrinking rapidly. Naturally, there are growing pains: the unemployment rate has fallen so sharply, from 14% in 2000 to about 4% today, that businesses are scrambling to find workers. "This is the best time in our history," says Sten Tamkivi, Skype's Estonian operations manager....

Most Estonians, enjoying a boost in living standards, are hoping the boom can continue. But there's at least one caveat: Estonia needs to resolve its labor shortage. "We are running out of people," says Craig Rawlings, president of the American Chamber of Commerce in Tallinn. Still, Estonia has shown that it can improvise. "We're a very small country," says Skype's Tamkivi. "That means we just have to be efficient." So far, they've managed.

The question is, if Brownback's candidacy takes off, will "Time" remember its own reporting on Eastern Europe's flat tax boom? Or will they once again go after the flat tax as a threat to liberals big government priorities?