A conceptual analysis of the flat tax.
The introduction of a flat tax is gaining popularity as a possible instrument for the reform of the current tax system. Under a flat-tax structure, the marginal tax rate does not change as taxable income rises. The constancy of the marginal tax rate is maintained regardless of the amount of taxable income. Most advocates of the flat tax prefer a revenue-neutral scheme, which means that taxable income would be correspondingly raised even though tax rates for most taxpayers would be significantly decreased. Supporters are championing the flat-tax system, arguing that it would encourage people to stop their tax-avoidance or tax-evasion behaviors and to become more productive, thereby contributing to the general economy. However, there is a consensus among economists that there is no clear support for the notion that the flat tax can improve investment decisions and boost productivity.
New York State Society of Certified Public Accountants
Fellows, J. A. (1995). A conceptual analysis of the flat tax. CPA Journal, 65(7), 18-22.
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