Arianna Huffington Comes Out in Favor of Flat Tax -- for Greece

June 14th, 2010 3:44 PM

Sometimes even the seemingly most unreasonable characters as far public policy goes can be reasoned with if the circumstances are right. Just sometimes it takes someone like Steve Forbes to pull it off.

On the June 14 broadcast of MSNBC's "Morning Joe," Forbes explained that a flat tax might be the medicine that Greece, a country on the fiscal brink needs.

"Well, when you engage in binge spending and the idea that going to revive an economy, you just get in a spiral on that," Forbes explained. "In terms of countries like Greece what should be done, in addition to the necessary austerity, is they haven't put in place policies, Joe that we did in the early '80s that enabled this  country to get back on its feet.

Forbes alluded to the bounce back Russia had after its economic struggles coming out of the collapse of the Soviet Union. 

"For example, one thing Russia did right 10 years ago was put in a flat tax," Forbes said. "Within two years, collections doubled because you make it, you pay it. Most central and eastern European countries have done the same thing with the tax codes. Do it to Greece. Greece makes it very hard to set up a legitimate business. Remove those barriers. Unleash their entrepreneurs. So, in addition to the belt tightening put in things that enable these countries to get back to their feet as well."

"Morning Joe" co-host Joe Scarborough expressed concern that belt-tightening measures may inhibit an economic recovery. But that isn't the case according to Forbes, if the recipe is right.

"No, if you combine it with these other pro-growth measures," Forbes said. "For example, we have enormous tax increases coming in this country. Don't do it. In Western Europe, reduce those onerous tax rates, labor practices that get in the way. One of the good things the Irish did - Ireland was hit hard by this recession. They faced up to it over a year ago. Didn't wait for, like Greece to hit the wall. One of the things they didn't do was raise their business tax. They have the lowest in Europe. The Europeans are always beating up on them - raise it, raise it. They kept it at 12.5 [percent]. Ireland is going to come out of this faster than other countries."

Huffington Post editor Arianna Huffington, also a guest on "Morning Joe," said she'd be in favor of a Forbes-style flat tax, in Greece that is assuming it got Greek citizens paying their fair share of taxes.

"Well, there's something to be said for the flat tax in Greece because nobody has been paying their fair share of taxes in Greece," Huffington said. "So if the flat tax can get Greeks to pay their fair share that might be worth it."

However, Huffington explained that she thought the real problem wasn't tax rates, but high unemployment, similar to what the United States is facing.

"But to prevent what happened to Greece from what happened in America, surely Steve, you must agree that the kind of unemployment we are facing right now - 26 million people out of work, either no job at all or under-employed or too discouraged to look for work - is not sustainable," she continued. "I mean the kind of fear and anxiety that is seen around the country is leading to violence in many areas. So, how do we deal with that when retail spending is down? When consumer spending is down? Doesn't the government have a role here?"

But rather than government being pro-active, as Huffington suggested, government should get out of the way to allow for business to expand Forbes explained.

"Well, the government has a role to provide an environment that makes it possible for a business to grow and hire," Forbes replied. "For example, this new tax bill that the Senate may pass is going to be very, very onerous on small businesses. Stop it. Stabilize the dollar so you get small business lending again. So you create the environment and entrepreneurs will step in. But right now everybody is on the side with uncertainty. We saw it in the jobs report where businesses extended the workweek instead of hiring new people because of uncertainty. So if the government provides the right environment, this thing will snap back."