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| A '''flat tax''' is a system that taxes everyone at the same rate, as opposed to a ]. | A '''flat tax''' is a system that taxes everyone at the same rate, as opposed to a ]. | ||
| Advocates who favor a flat tax claim that it will increase total tax revenues. One of the elements of most common flat tax proposals is that there are few if any deductions, credits, or other means of avoiding the tax. A typical scheme might be that each person gets an allowance of 10,000 (dollars, pounds or whatever), plus 5,000 for each dependent child. Everything above that level is taxed at 15%. This avoids the situation of millionares with good accountants paying little or no income tax. It is also argued that flat taxes are easier to administer and comply with than complex, graduated taxes. | Advocates who favor a flat tax claim that it will increase total tax revenues. One of the elements of most common flat tax proposals is that there are few if any deductions, credits, or other means of avoiding the tax. A typical scheme might be that each person gets an allowance of 10,000 (dollars, pounds or whatever), plus 5,000 for each dependent child. Everything above that level is taxed at 15%. This avoids the situation of millionares with good accountants paying little or no income tax. It is also argued that flat taxes are easier (and cheaper) to administer and comply with than complex, graduated taxes. | ||
| Advocates who oppose a flat tax claim | Advocates who oppose a flat tax claim | ||
Revision as of 08:08, 24 April 2002
A flat tax is a system that taxes everyone at the same rate, as opposed to a graduated tax.
Advocates who favor a flat tax claim that it will increase total tax revenues. One of the elements of most common flat tax proposals is that there are few if any deductions, credits, or other means of avoiding the tax. A typical scheme might be that each person gets an allowance of 10,000 (dollars, pounds or whatever), plus 5,000 for each dependent child. Everything above that level is taxed at 15%. This avoids the situation of millionares with good accountants paying little or no income tax. It is also argued that flat taxes are easier (and cheaper) to administer and comply with than complex, graduated taxes.
Advocates who oppose a flat tax claim that it will decrease total tax revenues, benefitting the rich at the expense of the poor. This depends in part upon the value of money to various groups. While the monetary value of a dollar (or other unit of currency) is the same for everyone, it is clearly 'worth' a lot more to someone who is struggling to afford food compared to a millionare. So taxing everyone at the same rate ignores the fact that richer people can give up more of their income without ill effects.