Sociology Index


Flat tax or flat rate tax is a constant rate tax system. Flat tax refers to income being taxed at one marginal rate, in contrast with Progressive Taxation. Flat tax would simplify tax law and the completion of a tax return but would make income tax regressive taxation. Flat tax structure has gained significant public support in North America. Flat tax structure in which all citizens would pay the same flat percentage of taxation on their income. In between Regressive Taxation and Progressive Taxation is Proportional Taxation, where the tax rate is fixed as the amount subject to taxation increases. Flat tax has been criticised: "The millionaire to pay exactly the same tax rate as the young nurse, the home help, the worker on the minimum wage." - Gordon Brown's speech to the Labour party conference September 26, 2005.

The Bush 35 Percent Flat Tax on Distributions from Public Corporations - Calvin H. Johnson.
Abstract: Corporate dividends now bear tax at both the corporate and the shareholder levels, Professor Johnson argues, yielding rates as high as 61 percent. The Bush administration has proposed to exclude dividends from shareholder tax, but only to the extent that the corporation has paid the 35 percent corporate tax. The 35 percent corporate tax would be paid whether shareholders would pay more or less than 35 percent tax, but private corporations, not publicly traded, would be able to elect a passthrough regime instead.
Professor Johnson begins by describing the policy judgments underlying the proposals.

Flat Taxes, Dual Taxes, Smart Taxes: Making the Best Choices
Jonathan R. Kesselman, "Policy Matters," November 2000.
Flat tax is found to carry significant shifts in the tax burden away from those at the lowest and particularly those at the highest incomes, with large tax savings at very high incomes. The dual tax considerably moderates the shifts in tax burdens that would arise with a flat tax. It finds that even if one accepts the view that one- and two-earner families with the same total incomes should pay the same tax, this can equally well be achieved by introducing income-splitting or joint filing as by adopting a flat rate tax. The alternative approach would maintain tax progressivity, unlike the flat tax. Most of the related claims for simplicity made by proponents of the flat tax are found to be overstated, and the dual tax would further reduce any such benefits.