What is not remembered and not understood about the proportional (flat) tax

Colleagues don't remember the arguments

In 2004, there was a letter in support of the idea from 100 economists. Among their arguments, "attracting foreign direct investment" (FDI) was not mentioned as a main goal, such was the increase in disposable income. No other similar tax reform has ever been so widely discussed and so massively supported. The latter, by the way, is also visible from the tax statistics. Its brief overview should be understandable to everyone, and the data can be checked and, if there are inaccuracies, recalculations can be made. But no one bothers to do this work.
As for FDI, it did fall as a share of GDP in 2009, but along with domestic investment and investment in the EU and globally. To claim that this is a flaw in taxation means that the person thinking in this way has not studied economics or cannot apply what they have studied.

And the discussions

Regarding the "lack" of broad discussion, I can recall the following from memory:
1. The idea was initially tested with a nationally representative survey of business attitudes in the period September – December 1997;

2. The corresponding IME report (by Lachezar Bogdanov and - to some extent - my modesty) was published in February 1998 and discussed in a comparative plan of similar reforms, then being conceived in Poland and Slovakia in March of this year;

3. The educational campaign on the proportional tax began in December 1997;

4. The 10% threshold is not invented, but is based on calculations of the percentage of income actually paid as tax for the period 1998-2001; the calculations were then made by Georgi Stoev and showed that the actual tax paid was 12.9%; in 2002-2004 this percentage remained unchanged for individuals, and slightly increased for corporations;

5. In 2002, the introduction of a proportional tax was supported by fifteen economists, and in 2003 – by 110; they sent a letter to the then Minister of Finance;

6. Since 2002, IME has been issuing a special bulletin on the issue every two months, which is also distributed as a printed edition to all members of parliament, ministers, deputy ministers, the main universal business (employer) associations and the more important guilds;

7. Since 2003, at the suggestion of Georgi Angelov, IME has been compiling an alternative to the government's annual budget, which shows and proves that with low (10 percent) taxes, budgets can be balanced without cutting social spending;

8. All major political parties that participated and passed the 4 percent barrier in the mid-2005 parliamentary elections, with the exception of the Bulgarian Socialist Party, support the reform introducing a 10 percent income tax;

9. Since its introduction in 2007 and 2008, Bulgarian and international independent economic and fiscal institutes have been monitoring the implementation of budgets and the behavior of the passes and compliance with tax laws; so far, I am not aware of anyone noticing any negative effects, despite the claims of some trade union leaders, BSP leaders after 2012, the late colleague Chavdar Nikolov (since 2010), colleague Lyubomir Hristov (also after 2012), colleague Plamen Oresharski (unexpectedly during the 2013 election campaign), colleague Ivan Kostov (then - 2013 - and now) and colleague Mitko Dimitrov - now.

And they don't understand the meaning of proportional tax

I don't understand why the BSP and some trade union leaders believe that the proportional, flat tax is part of right-wing politics.

In fact, it is a leftist idea because:

a. the poor benefit from it, due to the increase in disposable income, the so-called trickle-down effects and incentives to work more;

b. after its introduction, more money is collected in the budget (with the exception of corporate tax during economic decline) and the advocates of redistribution can spend more of someone else's (taxpayers') money;

c. it is fairer than a progressive tax because it treats different levels of income equally and eliminates the privileges of higher income earners to evade the application of tax and other laws…

This is also confirmed by the review of the main inequality monitoring index, conducted by my colleague Desislava Nikolova. Additional evidence can be found in the dynamics of savings and social stratification.
The writings of a mass of supposedly qualified specialists on the issue of this tax are so uneducated that they are below the level of commentary.

What opponents of proportional low taxes still don't understand

These days, in response to my summary of the process and reasons for introducing the flat tax in our country, a young gentleman wrote to me that it was incorrect to point out that the so-called rich countries until the 1920s (i.e. when they were getting rich) had low and proportional taxes because there was no infrastructure then.
To this gentleman and those who think like him, I want to answer the following.

From the beginning of the century until the 1920s, and even until the 1930s - as a result of the invention of the automobile and the decline of the horse as a means of transport - the development of road infrastructure was unprecedented. It was almost entirely financed by private funds, and in cities (streets) - by revenues from municipal budgets. Until the First World War, consolidated (i.e. with those of municipalities) government spending in the USA and Sweden, for example, was respectively slightly below and slightly above 10% of GDP.

By 1914, the railway infrastructure was almost 100% private or privately financed. The same goes for electricity and power distribution networks. This tradition is not the same everywhere, of course. In Bulgaria and Greece - no, in Turkey - yes.

The situation changed in the 1920s in the United States regarding railroads and transportation, when owners - in order to be protected from competition from newly emerging investors and suppliers - initially started PPPs with state authorities, and then (when the business became unprofitable) transferred ownership to these and the federal authorities.

However, by the 1930s (government spending everywhere had fallen to a maximum of 15-18% of GDP) the predominant infrastructure was private or privately financed.
Radical change came with the "innovations" of Mussolini, Hitler, and F.D. Roosevelt (an ardent admirer of Mussolini).

Briefly, in response to Ivan Petkov, I would like to emphasize:

• it is not mandatory for infrastructure to be financed by taxes;

• it has a connection with government projects - they mean more taxes - this is clearly demonstrated in Chapter 4 of Economics in One Lesson by Henry Hazlitt;

• government "services" in infrastructure and elsewhere are actually user-pay obligations;

• it is easier, cheaper and more profitable for infrastructure to be paid for by those who use it directly, rather than through taxes;

• the fact that low and proportional (flat) taxes collect more revenue (that the effect called the "Laffer Curve" works) allows for more government spending in this area as well;

• as a result of the unbalanced (deficit) spending of tax revenues and the invention of new "services", "social rights" (for the purpose of buying votes by promising privileges), etc., any increase in the level of revenues in the central budgets turns out to be insufficient;

• these deficits cause governments to take on debt and ultimately seek to raise taxes or print money;

• the meaning of these actions is one: increasing the dependence of citizens and companies on governments until the system collapses - locally or globally;

• the point of proportional and low taxes – besides increasing the disposable income of citizens and companies so that they can work and earn more – is to put a stop to the processes of accumulating deficits, debts and dependence.

It is true that some classical economists, including Adam Smith, believed that infrastructure spending was a good area of government spending. But this view is understandable:

• they have before them the experience of nationalizing roads and post offices during absolutism;
• consider these endeavors the lesser evil
• and they are not witnessing such growth of states (government spending), as we know it and which is one of the main causes of the modern debt and financial crises.