Estonia Does It Well

[ndrosen]

A while back, J.D. Tuccille had a column about the Tax Foundation’s International Tax Competitiveness Index 2026, which gives the United States a fairly good score, but reserves its highest rating for Estonia, about which the report says: “First, it has a twenty-two percent tax rate on corporate income that is only applied to distributed profits. Second, it has a flat twenty-two percent rate on individual income that does not apply to personal dividend income. Third, its property tax applies only to the value of land, rather than to the value of real property or capital. Finally, it has a territorial tax system that exempts one hundred percent of foreign profits earned by domestic corporations from domestic taxation, with few restrictions.”

Since land is a form of real property, “real property” in the above statement should presumably have been “buildings”, or “buildings and other improvements.” Otherwise, it seems that Estonia is doing taxes better than most countries. To improve its tax system still further, Estonia need only raise its land tax, and reduce its personal and corporate income taxes.

Comments

[warriorsavant]

They also seem to do government finances well in general.

Although I don't claim great knowledge of it, one thing that impressed me was at some point they made all buses free. Their reasoning was that they wanted people to be able to get to work, but the people who most needed it (the working poor), couldn't even afford bus passes.

They also seem to have one of the best e-government services systems (although I don't know how hacker-proof it is)

[ndrosen]

Free or subsidized transit works well in combination with land value taxation. If free buses make it feasible for people in poor neighborhood A to commute to jobs in areas B, C, and D, then land rents in A increase, so with LVT, revenue from the higher land values can pay for the buses.

Without LVT, private landlords can charge more money for apartments or houses in A, and largely keep that money for themselves. Someone else must be taxed to buy fuel, pay the bus drivers, and cover other expenses.