Flat taxes do not deliver growth

Guido Fawkes claims flat taxes lead to growth. They do not as data from the IMF shows. Flat tax countries are growing at a slower rate than the rest of the world.

Earlier today, Guido Fawkes drifted from his muck raking comfort zone to offer an economic theory based on three data points. In response to blogs from myself and Labour List about Britain’s slow growth performance, the normally sharp blogger implied that the Baltic countries’ flat taxes were the reason behind their high growth rates.

Any statistician will tell you that a correlation does not make a causation. The problem for Guido is that he doesnt even have a correlation. There are 21 countries with flat taxes. Projections from the IMF show that their average expected growth rate for 2011 is 4.1 per cent.

By contrast, the global economy will grow by 4.3 per cent this year so flat tax economies are underperforming the rest of the world.

There’s a decent debate to be had about why the Baltic countries are growing faster than other European economies but to claim that it’s all down to their flat tax makes about as much as sense as claiming that heavy taxation is bad for the economy – another Guido staple.

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