ETUC: Flat Tax an Affront to “European Social Model”

Joining other ‘European tigers’ like Ireland and many ex-Communist bloc countries, Bulgaria has announced plans to lower personal income taxes to a flat 10%, in line with its current corporate tax code. However, this plan has attracted unfavorable attention from two Bulgarian labor confederations and the European Trade Union Confederation (ETUC):

Just a few months after Bulgaria joined the European Union, the Government of Prime Minister Sergey Dmitrievich Stanishev has agreed a tax reform introducing a flat tax rate of 10%…At a joint press conference yesterday (2/9/07) in Sofia, ETUC Deputy General Secretary Reiner Hoffmann stressed that flat taxes are in clear contradiction to the principles of the European Social Model. “…Only countries with decent and graduated tax systems, like those in Scandinavia for example, will meet the Lisbon targets of economic competitiveness, social cohesion and environmental sustainability.”

We prefer a more sober assessment of flat tax systems as articulated by William Gale of The Brookings Institution:

In principle, replacing the income tax with a…tax, such as the flat tax, offers the possibility of improving the efficiency, equity, and simplicity of the tax system. But these gains are uncertain and depend critically on the details of  the reform.