Tax Resources

Flat tax

What is a flat tax?

A flat tax is a tax on income where the tax is a certain percentage of income. Flat tax is income tax which is unlike today's multiple levels of taxation. Income tax today has many levels of taxation depending on how much income is made.

One of the disadvantages of a flat tax

One of the disadvantages of a flat tax is that flat tax system will have fewer tax deductions than today's taxation system. The flat tax system could possibly offer no tax deductions at all. An example of flat tax might be that everyone pays 20% of their income in tax. People who are in favor of the flat tax claim that flat tax would make the tax laws much simpler and fairer than the tax laws are at the present time. The flat tax pros and cons continue to be discussed in a flat tax debate that is often present in political campaigns.

National sales tax

A national sales tax would be just like today's state sales taxes and local sales taxes. One of the disadvantages national sales tax was that it would be set at a much higher rate than the current sales tax system. One proposal for national sales tax was for a 15% sales tax. The national sales tax was intended to replace the income tax.

Under either flat tax system or national sales tax system, there would still need to be some federal agency (like the IRS) to enforce the tax laws. Efforts to enforce the tax laws can be through an audit of small businesses and the self employed or retailers who fail to report sales. Small businesses and the self employed are more likely to fail to report income under a flat tax system. Either way, the IRS is not likely to disappear in the near future.  

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