The lesson: Flat taxes seem to work pretty well when an economy is growing—but not so well when it is stagnant or shrinking. Across Central and Eastern Europe, “every country is in need of more revenue because of debt and public deficits,” says Andreas Peichl, a senior research associate at the IZA think tank in Bonn, Germany. “There is a feeling that the crisis has affected poorer people more than the rich and that the rich should contribute more. But that is not easy to do if you only have one tax rate.”
Given the extremes of inequality we are now facing – and likely to intensify as technology cuts yet another swathe through entire industries that sustain a middle class – I have to say I am pragmatically against such a tax now, even though I have consistently supported one in the past. I’m only flip-flopping, I hope, in the best way. A flat tax remains theoretically and symbolically deeply attractive to me. I still believe that penalizing people for succeeding in our economy is unjust to those individuals. But in our current contingency of accelerating inequality, a flat tax would be socially destructive.