Lessons from the Republic of Georgia on Economic Freedom
As a child, I was told by many people that the United States was the only free country in the world, the land of the free, which implicitly suggested that every other country was somehow not free. I thought that other countries were tyrannical states, which subjugated their citizens and treated them like slaves. As I grew older, I realized that nothing was further from the truth. A myriad of free societies exist throughout the world, many of which are free in ways that are completely different from the United States.
The myth that America is the freest country in the world is counterproductive. To believe categorically that U.S. citizens are the freest, without consideration of how other countries operate, prevents us from attaining real human progress, freedom, and prosperity. For example, the United States comprises approximately 4 percent of the world’s population, but is home to nearly 20 percent of the world’s prisoners, according to data from the World Prison Brief. That statistic alone does not sound like the land of the free.
To overcome the shortcomings of our nation and become a true land of liberty, we must look beyond our borders and learn from the successes of other nations. The Republic of Georgia is one such example, demonstrating how ambitious reforms can enhance freedom and prosperity. Over the past two decades, Georgia has implemented policies that not only spurred economic growth but also tackled bureaucracy and promoted greater freedom of mobility.
Nestled in the lush Caucasus Mountains south of Russia lies the Republic of Georgia (Sakartvelo), a nation of striking beauty and history. In the past two decades, this post-Soviet country has undergone a freedom-focused revolution, a revolution that began in 2004 with the election of Mikheil Saakashvili, a “libertarian and unabashed reformer.” Under Saakashvili’s guidance, the Georgian tax system changed dramatically by shifting its progressive taxes to a flat rate system and reducing the overall number of taxes from 22 to 6. After implementing those policies, the country’s GDP doubled in the first four years and tripled in the first eight years. Foreign direct investment into the country also quadrupled in the first four years. The country’s ranking in the World Bank’s “ease of doing business” index skyrocketed, climbing from 147th in 2003 to 11th by 2009.
Saakashvili’s tenure ended in 2013, but one of his most radical reforms, the “Economic Liberty Act,” ensures that Georgia will maintain its limited government for many years to come. This constitutional amendment enshrines into law provisions that: government spending relative to GDP cannot surpass 30 percent, the ratio of state debt to GDP cannot surpass 60 percent, any deficit in the state budget relative to GDP shall not be more than 3 percent, and that taxes cannot be raised without a popular referendum. Georgia today has been promoted by international libertarians and global mobility experts as “one of the most capitalist countries in the world.”
One area in which the Republic of Georgia has taken a strong position is its policies on international mobility and openness to economic migration and investment. In the Republic of Georgia, with an investment of $100,000 or more in residential property, an individual is allowed to become a temporary resident in the country, which can eventually lead to permanent residency. The process for receiving a residency permit is incredibly simple. All that is required after purchasing property is to submit an application at a Public Service Hall, where the applications can be processed in as little as 10 days and, at the most, 30 days. While the United States does have a residency through an investment program, the EB-5 Immigrant Program, its capital requirements are much steeper, typically requiring over $1 million in investment ($800,000 in rural areas).
Additionally, owing to an extensive backlog of visa applications, the time that it takes to receive an initial decision on these applications is about 5 years (58 months) as of December 2024. That waiting period sharply contrasts with the 10-30 days that it takes to receive a residency permit in the Republic of Georgia.
Additionally, the Republic allows citizens from more than 50 countries to enter and stay for a year without a visa. According to personal anecdotes on Reddit, many individuals stay in Georgia for much longer than a year by doing a “visa run,” leaving the country for one day and then returning to prolong their stays. Visa runs were especially common among Russians post-2022 when more than 110,000 Russians moved to Georgia.
The United States, on the other hand, has a much stricter policy. Only citizens of 42 nations, primarily from Western Europe, are allowed to enter without a visa. They are allowed to stay 90 days at most, and overstaying that limit carries sharp penalties, such as the inability to ever receive a visa to travel to the United States again. Individuals ineligible for the Visa Waiver Program must apply for a B2 Tourist Visa, a process that often leads to denial, especially for applicants from developing countries, and typically requires an interview at an embassy or consulate.
Regarding taxes, the Republic of Georgia generally has far more lenient policies than the United States. The Republic imposes a 20 percent flat tax on income, plus an additional 4 percent for the state pension scheme (2 percent is paid by employers directly and 2 percent by the employees, similar to U.S. Social Security). Additionally, the country makes a distinction between “earned” and “passive” income, with a tax rate of only 5 percent on passive income sources, such as dividends and rental property. Individuals living in the American state of Georgia, on the other hand, would likely pay a flat rate of 5.49 percent in state income tax, a variable 10-37 percent in federal income tax, which changes based on income level, and an additional 7.65 percent in Social Security and Medicare taxes. Admittedly, the Republic of Georgia does have a high 18 percent VAT tax, which is much higher than the average sales tax in the U.S. of 6.6 percent, but still much lower than in many European countries, especially countries in the European Union, where the average VAT tax is 21.6 percent.
Additionally, property taxes in the Republic of Georgia are significantly lower than in the United States. Individuals in the country pay 0.05 to 0.2 percent of a taxable property’s market value per year, but individuals making below 40,000 Georgian lari (GEL) per year (which is far above the average yearly household income of roughly GEL 20,000) do not need to pay any property tax. Meanwhile, in the American state of Georgia, the effective property tax is 0.72 percent of a property’s value per year. If you own property in the Republic of Georgia, it is your property for as long as you live, meanwhile in the United States, you are effectively renting it from the government, with the constant threat of repossession and foreclosure looming around the corner if you are unable to pay property taxes.
More importantly, the Republic of Georgia, unlike the United States, does not cast a draconian worldwide tax net on its citizens, even when they have moved abroad. If two Georgians (one from Atlanta and one from Tbilisi, the capital of the Republic of Georgia) moved to Dubai and earned more than $120,000 in income, the amount of taxes that they owe would be dramatically different. The Georgian from Tbilisi would pay $0 because the Republic of Georgia does not tax its citizens abroad. The American, on the other hand, having surpassed the foreign earned income exclusion threshold, would pay steep taxes to the United States, even though the UAE has no income tax. Moreover, for residents of the Republic of Georgia, foreign-sourced income (such as foreign stocks and dividends) is exempt from income tax, a privilege that is absent in the United States.
Georgia has been in the news recently because of the protests over the country’s decision to suspend negotiations about joining the European Union. The decision was implemented by the winner of the 2024 Georgian parliamentary elections, the “Georgian Dream Party.” While this decision certainly affects the county’s long-term geopolitical orientation, the re-election of the Georgian Dream party is unlikely to have any significant effects on Georgia’s free market policies. The Georgian Dream Party has been the ruling party in Georgia since 2012, and the country’s libertarian policies have remained intact.
No country is perfect, and the United States certainly has elements that make it desirable from a global perspective, such as the country’s gun rights and comparatively high incomes (even relative to other high-income countries). The Republic of Georgia also still ranks lower than America in the Heritage Foundation’s economic freedom index, with the U.S. ranked 25 and Georgia 32. That said, the fact that the United States has its strengths does not mean that we cannot learn from other nations, and the Republic of Georgia has done an excellent job of cultivating economic freedom, attracting capital, and generally eliminating the burden of government bureaucracy, making it easy to do business in the country.
As the world becomes increasingly globalized and individuals become aware of their international options, the United States should adopt globally competitive policies; otherwise, it risks an exodus of people and capital from “the land of the free.”
