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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 ] or ] scheme. | ||
| Advocates who favor a flat tax claim that it will end unfair discrimination. It is also argued that flat taxes are easier (and cheaper) to administer and comply with than complex, graduated taxes. Most political parties that adovate the introduction of a flat tax are on the right of the political spectrum. | |||
| 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. | |||
| ⚫ | Those who oppose a flat tax claim that it will benefit the rich at the expense of the poor. This argument can be made by looking upon the value of money to various groups and not simply the rate of taxation. 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. | ||
| Advocates who oppose a flat tax claim | |||
| that it will decrease total tax revenues, | |||
| ⚫ | |||
| The amount of income the government receives from a flat tax depends entirely on the level of the tax. Usually flat taxes are advocated by parties that also believe in a tax cutting agenda, but a flat tax can also be used to increase government revenue if it raises the average tax rate. | |||
| There are other tax system changes that are often combined with a flat tax. A common one is leaving few if any deductions, credits, or other means of avoiding the tax. This avoids the situation of millionares with good accountants paying little or no income tax, and can greatly increase governemnt revenue. But it also reduces the use of tax deductions which are often deliberatly created by governments to promote desired ends. | |||
| Flat taxes are also often combined with ]. A typical scheme might be that each person gets an allowance of 15,000 (dollars, pounds or whatever), Everything above that level is taxed at 30%. Some would argue that this is really not a flat tax as in practice it creates a graduated system of taxes. | |||
| Most developed countries do not have a flat tax for income taxes. On the other hand, sales taxes are almost always applied at the same level irrespective of income. | |||
Revision as of 13:05, 24 April 2002
A flat tax is a system that taxes everyone at the same rate, as opposed to a graduated or progresive tax scheme.
Advocates who favor a flat tax claim that it will end unfair discrimination. It is also argued that flat taxes are easier (and cheaper) to administer and comply with than complex, graduated taxes. Most political parties that adovate the introduction of a flat tax are on the right of the political spectrum.
Those who oppose a flat tax claim that it will benefit the rich at the expense of the poor. This argument can be made by looking upon the value of money to various groups and not simply the rate of taxation. 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.
The amount of income the government receives from a flat tax depends entirely on the level of the tax. Usually flat taxes are advocated by parties that also believe in a tax cutting agenda, but a flat tax can also be used to increase government revenue if it raises the average tax rate.
There are other tax system changes that are often combined with a flat tax. A common one is leaving few if any deductions, credits, or other means of avoiding the tax. This avoids the situation of millionares with good accountants paying little or no income tax, and can greatly increase governemnt revenue. But it also reduces the use of tax deductions which are often deliberatly created by governments to promote desired ends.
Flat taxes are also often combined with garunteed minimum income programs. A typical scheme might be that each person gets an allowance of 15,000 (dollars, pounds or whatever), Everything above that level is taxed at 30%. Some would argue that this is really not a flat tax as in practice it creates a graduated system of taxes.
Most developed countries do not have a flat tax for income taxes. On the other hand, sales taxes are almost always applied at the same level irrespective of income.