Less than a revolution

This IMF study says that the switch to flat tax in Russia resulted in increased government revenues from personal income tax, both absolutely and as a fraction of GDP. That is, not because of the increased output, but because of the better tax collection. Here are some key findings:

The Russian flat tax experiment is particularly interesting: after the introduction of flat taxes, and effective personal income tax rate cuts, tax revenues increased substantially and almost immediately. Furthermore, they increased much faster than labor supply and output. The paper explains how tax rate cuts can increase tax revenues through tax compliance spillovers in such a manner.

This paper shows that endogenous tax compliance responses can be responsible for the massive increase in tax revenues. ...small cuts in the tax rates can lead to much larger changes in the behavior of taxpayers — most importantly, it can make them much more likely to declare their incomes honestly. These spillovers can lead to increasing tax revenues.
…taxpayers evade less tax payments when the tax rate is lower… evasion increases with the tax rate.

Libertarians were getting perhaps too romantic about the "flat tax revolution" in Eastern Europe lately. Now this study reveals a new perspective, although it is something that most Eastern Europeans have always known - that this revolution was not about downsizing government, but about expanding it. When taxpayers are evasive and the policing system disorganized as was the case in Eastern Europe, the best way to raise government revenues is the introduction of flat tax, and that was the sole purpose of introducing it. Not the enlightened politicians unleashing private initiative, and certainly not a sudden revelation about the meaning of social justice.

Is it still a good thing? Probably, as less resources are directed into hiding taxes, and then for looking for those who are hiding them. And it is simpler. But don't forget that if the study shows that the personal income tax revenues have increased, that means nothing but that the average taxpayer's de facto burden has increased. Follow the money.