View Research by Author - Clifford G. Gaddy

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On January 1, 2001, Russia introduced what has frequently been called a "flat tax." In this report, we examine the limited research and information available on the effects of Russia’s personal income tax reform and reach five principal conclusions: The change in the personal income tax was not a stand-alone reform and the personal income tax component of the reform package bears little resemblance to a Hall-Rabushka flat tax; economic growth had begun well before the reforms and microeconomic data suggest that the tax rate reductions had little if any effect on labor supply; and it is likely that the significant increase in compliance following the 2001 reform is attributable to changes in the administration and enforcement of tax laws.

On January 1, 2001, Russia introduced what has frequently been called a flat tax. Over the next several years, the country's tax revenue and GDP grew dramatically. Some commentators claim those two sets of events were causally related (Mitchell, 2003). Others just link the two repeatedly, being careful never to explicitly assert causation (Rabushka, 2002, for example). In the United States, supporters of the Hall-Rabushka (1995) flat tax often refer to the Russian example as evidence in their favor. In this paper, we examine the limited research and information available on the effects of Russia's personal income tax reform and reach five principal conclusions.

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