November 10, 2003
By Daniel J. Mitchell, Ph.D.
Few Americans would want to trade places with the people of
Iraq. But come tax time next April, they may begin to wonder who's
That's because the Iraqis soon will enjoy something we don't --
a simple and fair tax system. Beginning in January, all Iraqis will
pay a "flat tax" of 15 percent. President Bush's administrator in
Baghdad, L. Paul Bremer, recently approved this pro-growth tax
system, which replaces Saddam Hussein's soak-the-rich system that
had tax rates as high as 45 percent.
An Iraqi flat tax is good news for the United States on several
counts. Perhaps most importantly, it will advance our national
security interests by boosting the Iraqi economy. A prosperous and
growing Iraq will be less susceptible to radical politics -- and
less fertile territory for terrorist groups seeking new recruits.
And the sooner Iraq is stable and free, the sooner our troops can
But there are other benefits to Iraqi tax reform. It will:
In spite of this success, however, the Iraqi flat tax likely
will prove unpopular with France and Germany. They opposed the war
in Iraq, and they also happen to be leading the effort for global
"tax harmonization" (meaning that all nations would have bad tax
policy so that oppressed European taxpayers will have less
incentive to move their money out of places like France and
Germany). It would be deliciously ironic if the Iraqi flat tax
begins to attract business away from Europe's welfare states and
helps pressure these socialist nations to lower their tax rates.
This might be a fringe benefit of Iraqi tax reform.
The Bush administration deserves considerable praise for the
Iraqi flat tax. Officials could have left Saddam's bad tax system
in place or turned the Iraqi economy over to the United Nations
(who probably would have increased tax rates even higher!). But the
president and his team know that peace and stability in the Middle
East are impossible without prosperity.
The next step: Find some country to liberate us and replace our
terrible tax code with a 15 percent flat tax. Any takers?
Mitchell is the McKenna Fellow in political economy
at The Heritage Foundation (heritage.org), a Washington-based
public policy research institute.
Distributed on the Scripps Howard wire
Few Americans would want to trade places with the people of Iraq. But come tax time next April, they may begin to wonder who's better off.
Daniel J. Mitchell, Ph.D.
McKenna Senior Fellow in Political Economy
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