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Encyclopedia > Proportional tax

A flat tax, also called a proportional tax, is a system that taxes all entities in a class (typically either citizens or corporations) at the same rate (as a proportion of income), as opposed to a graduated, or progressive, scheme. The term flat tax is most often discussed in the context of income taxes. The flat tax is not used in many developed countries on a national level, standing in contrast to the more widely used progressive income tax, in which citizens and corporations with higher incomes pay tax at a higher rate than those with lower income. A tax is a charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (e. ... The word citizen may refer to: A person with a citizenship Citizen Watch Co. ... It has been suggested that Incorporation (business) be merged into this article or section. ... A progressive tax, or graduated tax, is a tax that is larger as a percentage of income for those with larger incomes. ... An income tax is a tax levied on the financial income of persons or corporations. ... A progressive tax, or graduated tax, is a tax that is larger as a percentage of income for those with larger incomes. ...


Many flat tax proposals, however, have a level below which income is not taxed. In this case the tax remains progressive over all incomes. As used by many experts it is not enough to have just one rate, but all income must be taxed equally without special deductions or fractional counting of some income. (TW)

Contents


History and current use

Historically, the introduction of flat taxes was considered an improvement over the previous situation, where nobility and the clergy were often (nearly) exempt from paying any taxes at all. This was for instance one of the causes of the French Revolution. During the nineteenth century, flat taxes for all incomes were eventually introduced in most European countries. The causes of the French Revolution, the uprising which brought the regime of King Louis XVI to an end, were manifold. ...


After World War I, a progressive income tax was introduced in the majority of countries to fund increased government spending for social programmes and, in particular, large scale wars. In more recent years, some people have come to the conclusion that very high tax rates for the highest income classes are useless: the taxpayers, especially the rich and mobile ones, evade these taxes. Arthur Laffer, for example, predicted that lowering tax rates would therefore increase tax returns. However, proponents of high taxes claim that they have worked quite well in, e.g., Sweden, although detractors claim that Sweden's government programs are becoming a drain on its economy. Combatants Allies: • Serbia, • Russia, • France, • Romania, • Belgium, • British Empire and Dominions, • United States, • Italy, • ...and others Central Powers: • Germany, • Austria-Hungary, • Ottoman Empire, • Bulgaria Casualties Military dead: 5 million Civilian dead: 3 million Total: 8 million Full list Military dead: 3 million Civilian dead: 3 million Total: 6 million Full... A progressive tax, or graduated tax, is a tax that is larger as a percentage of income for those with larger incomes. ... Image:Arthurlaffer-1. ...

Countries levying a flat tax in Europe. Those shaded lightly have a tax rate lower than 20%, those shaded darkly have a tax rate greater than 20%
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Countries levying a flat tax in Europe. Those shaded lightly have a tax rate lower than 20%, those shaded darkly have a tax rate greater than 20%

The flat tax has made something of a "comeback" in recent years. In the U.S., former House Majority Leader Dick Armey and FreedomWorks have pushed grassroots support for the flat tax. Overseas, policymakers have had greater success. This is largely as a result of its application in several countries of the former Eastern Bloc, where it is generally thought to have been successful, although many argue that this is not the case (see below) [1]. This has attracted much interest in countries such as the US, where it has perhaps been bolstered by a general swing towards conservative politics [2]. Wikipedia does not have an article with this exact name. ... Wikipedia does not have an article with this exact name. ... FreedomWorks is non-partisan non-profit organization based in Washington D.C. with over 700,000 grassroots activists who recruit, educate, motivate and mobilize volunteers who desire less government, lower taxes, and more economic freedom. ... Eastern bloc During the Cold War, the Eastern Bloc (or Soviet Bloc) comprised the following Central and Eastern European countries: Bulgaria, Romania, Hungary, East Germany, Poland, Albania (until the early 1960s, see below), the Soviet Union, and Czechoslovakia. ... Motto: E pluribus unum (1789 to present) (Latin: Out of Many, One) In God We Trust (1956 to present) Anthem: The Star-Spangled Banner Capital Washington, D.C. Largest city New York, New York Official language(s) None at federal level; English de facto Government • President  â€¢ Vice President Federal republic... Conservatism or political conservatism is any of several historically related political philosophies or political ideologies. ...


The countries that have recently reintroduced flat taxes have done so largely in an effort to generate more economic growth. The Baltic countries of Estonia, Latvia and Lithuania have had flat taxes of 24%, 25% and 33% respectively with a tax exempt amount, since the mid-1990s. On 1 January 2001, a 13% flat tax on personal income took effect in Russia. Ukraine followed Russia with a 13% flat tax in 2003. Slovakia introduced a 19% "true" flat tax (i.e. on corporate and personal income, for VAT etc., almost without exceptions) in 2004; the number of new firms registering in Slovakia jumped 12%. Romania introduced a 16% flat tax on personal income and corporate profit on January 1, 2005. The Baltic Sea The terms Baltic countries, Baltic Sea countries, Baltic states, and Balticum refer to slightly different combinations of countries in the general area surrounding the Baltic Sea. ... The 1990s decade refers to the years from 1990 to 1999, inclusive. ... January 1 is the first day of the calendar year in both the Julian and Gregorian calendars. ... 2001: A Space Odyssey. ... vat can be a type of barrel used for storage. ... January 1 is the first day of the calendar year in both the Julian and Gregorian calendars. ... 2005 (MMV) was a common year starting on Saturday of the Gregorian calendar. ...


In the United States, although the system of national income tax is progressive, flat tax is sometimes levied on income taxes in smaller jurisdictions. Five US states — Illinois, Indiana, Massachusetts, Michigan and Pennsylvania — have a flat state tax on personal income, with rates ranging from 3% in Illinois to 5.3% in Massachusetts (Pennsylvania's is a pure flat tax, with no zero-bracket amount). Official language(s) English Capital Springfield Largest city Chicago Area  - Total  - Width  - Length  - % water  - Latitude  - Longitude Ranked 25th 149,998 km² 340 km 629 km 4. ... Official language(s) English Capital Indianapolis Largest city Indianapolis Area  - Total  - Width  - Length  - % water  - Latitude  - Longitude Ranked 38th 94,321 km² 225 km 435 km 1. ... Official language(s) English Capital Boston Largest city Boston Area  - Total  - Width  - Length  - % water  - Latitude  - Longitude Ranked 44th 10,555 mi²; 27,360 km² 183 mi; 295 km 113 mi; 182 km 13. ... Official language(s) English de-facto Capital Lansing Largest city Detroit Area  - Total  - Width  - Length  - % water  - Latitude  - Longitude Ranked 11th 96,716 mi² 250,494 km² 239 miles 385 km 491 miles 790 km 41. ... Official language(s) None Capital Harrisburg Largest city Philadelphia Area  - Total  - Width  - Length  - % water  - Latitude  - Longitude Ranked 33rd 119,283 km² 255 km 455 km 2. ...


Recent and current proposals

Currently, Greece (25%), the Czech Republic and Croatia are planning to introduce flat taxes. Paul Kirchhof, who was suggested as the next Finance minister of Germany in 2005, has suggested introducing a flat tax rate of 25% in Germany as early as 2007, which sparked widespread controversy. Currently, the German tax system is claimed to be the most complex tax system in the world. However, Kirchhof has since decided to leave politics, following the failure of his CDU party to win power in the 2005 German election, which many attributed to the unpopularity of this proposal. Paul Kirchhof (* February 21, 1943 in Osnabrück) is a German expert in law and finance. ... Taxation is one of the most criticized matters in Germany. ... This article needs cleanup. ...


On 27 September 2005, the Dutch Council of Economic Advisors suggested introducing a flat tax rate of 40% in The Netherlands. To keep the rate low, the number of possible tax deductions would be reduced, and people over 65 would be required to pay higher taxes. September 27 is the 270th day of the year (271st in leap years) in the Gregorian calendar, with 95 days remaining. ... 2005 (MMV) was a common year starting on Saturday of the Gregorian calendar. ...


In the United States, proposals for a flat tax at the federal level have emerged repeatedly in recent decades during various political debates. Jerry Brown, former Democratic Governor of California, made the adoption of a flat tax part of his platform when running for President of the United States in 1992. At the time, rival candidate Tom Harkin ridiculed the proposal as having originated with the "Flat Earth Society". Four years later, Republican candidate Steve Forbes proposed a similar idea as part of his core platform. Although neither captured his party's nomination, their proposals prompted widespread debate about the current U.S. income tax system. Edmund Gerald Jerry Brown, Jr. ... The Democratic Party is one of the two major political parties in the United States. ... Governors Arnold Schwarzenegger and Gray Davis with President George W. Bush (2003) Seal of the Governor of California (without the Roman numerals designating the governors sequence) See also: List of pre-statehood governors of California, List of Governors of California The Governor of California is the highest executive authority... The presidential seal was first used by president Hayes in 1880 and last modified in 1959 by adding the 50th star for Hawaii. ... Presidential electoral votes by state. ... Thomas Richard Harkin (born November 19, 1939) is the junior United States Senator from Iowa. ... The Flat Earth Society was an organization based in England and later in Lancaster, California that advocated the belief that the Earth is not a sphere but is flat (see flat Earth). ... The Republican Party, often called the GOP (for Grand Old Party, although one early citation described it as the Gallant Old Party) [1], is one of the two major political parties in the United States. ... Malcolm Stevenson Steve Forbes Jr. ...


Flat tax plans that are presently being advanced in the United States also seek to redefine "sources of income"; current progressive taxes count interest, dividends and capital gains as income, for example, while the flat tax plan advanced by Steve Forbes narrows the definition of income to apply only to employee wages. Malcolm Stevenson Steve Forbes Jr. ...


Flat taxes have also been considered in the United Kingdom by the Conservative and Liberal Democrats parties. However, it has been roundly rejected by Gordon Brown, Chancellor of the Exchequer for Britain's ruling Labour Party, who said that it was "An idea that they say is sweeping the world, well sweeping Estonia, well a wing of the neo-conservatives in Estonia", and criticised it by describing it as thus: "The millionaire to pay exactly the same tax rate as the young nurse, the home help, the worker on the minimum wage" [3]. Conservatism or political conservatism is any of several historically related political philosophies or political ideologies. ... The Liberal Democrats, often shortened to Lib Dems, are a liberal political party in the United Kingdom. ... The Right Honourable Dr. James Gordon Brown (born 20 February 1951) is a Scottish Labour Party politician. ... The Rt. ... The Labour Party has historically been the principal left wing political party of the United Kingdom since its formation in the early 20th century (see British politics). ...


Possible implementations

There are several ways that flat tax implementation has been proposed, and very rarely has the proposition ammounted to a "true" flat tax where everyone pays exactly the same rate across their taxable income.


Flat tax with deductions

The most common flat tax implementation proposition, and the type that has been proposed in the United States by Steve Forbes in his presidential campaign and by Dick Armey to congress, calls for base deductions for people and dependents. For example, the Armey proposition called for deductions of $26,200 for married couples filing jointly, $13,100 for individuals, $17,200 for single head of households, plus $5,300 for each dependent. After those deductions (and no other), each family would pay a 17% rate on the difference. Businesses would pay a flat 17% rate across all profits. Similar proposals have been discussed with different rates and deductions. Malcolm Stevenson Steve Forbes Jr. ... Dick Armey on NBCs Meet the Press. ...


Under Steve Forbes’ plan for his 1996 and 2000 presidential campaign, income tax would be replaced by a consumption tax. That is, there would be a tax on spending only (income minus savings). A family of four would pay no tax on the first $42,000 dollars spent. Spending above that amount would be taxed at a flat rate of 17% (if the tax is included as part of the tax base) or 20.5% (if the tax is on top of the base), so that a family of four that spends $43,000 dollars would forfeit $205 to the government.


As the "pure flat tax" has proven difficult to sell, "modified" varieties of the flat tax have been proposed which would allow deductions for specific items, but would eliminate most existing deductions. Commonly, charitable deductions and home mortgage interest are the items discussed, as they are highly popular and often used by current taxpayers.


Negative income tax

Another flat tax variant that has been extremely popular among US economists has been the Negative Income Tax that Milton Friedman proposed in Capitalism and Freedom. The basic idea is the same as a flat tax with personal deductions, except that it implements a neutral wealth redistribution system which avoids any possibility of the incidence of welfare trap, whilst distributing the money in what economists regard as the most efficient manner - as cash (as opposed to food stamps, medicaid, etc). Under an NIT, a deduction system and flat tax rate would exist as in previously mentioned flat tax schemes. However, people would be able to collect the tax rate of the difference between their deduction and their true income. As an example, let us say that we have a flat tax system where each adult gets a $20,000 deduction, married couples filing jointly receive a $40,000 deduction, and either receives an additional $7,000 in deductions per dependent. The flat tax rate would be 20%. Under such a system, a family of four making $54,000 a year would pay no taxes. A family of four making $74,000 a year would pay 20% on the difference of $20,000, or $4,000 in taxes, just like the previously mentioned personal deduction systems. The difference comes in people who make less than the deduction: if the same family made $34,000 a year, they would pay "negative income tax" (in other words, they would receive money). In this case they would receive a check for $4,000. Such a system would be intended not only to replace the United States' current tax structure, but also its current welfare structure of food stamps, medicare/medicaid, social security, etc. Much of the spirit of this type of reform has been achieved in the form of the Earned Income Tax Credit, although without corresponding drops in other types of welfare spending. Some critics of the NIT do not like that it does not have a work requirement in order to receive welfare, which some welfare systems have recently adopted. Others see the wealth redistribution as a subsidy to industries that use low cost labour - it has been argued that people who make this point would probably be proponents of a true flat tax, as it could be said that the NIT is no more a subsidy to low skill labour-intensive industry than other welfare mechanisms for the poor that already exist. In economics, a negative income tax (abbreviated NIT) is a method of tax reform that is popular among economists but has never been fully implemented. ... Milton Friedman Milton Friedman (born July 31, 1912) is a U.S. economist, known primarily for his work on macroeconomics, microeconomics, economic history, statistics, and for his advocacy of laissez-faire capitalism. ... The welfare trap is a name for the phenomenon by which taxation and welfare systems jointly contribute to keep people on social insurance. ... The United States federal Earned Income Tax Credit (EITC) is a refundable tax credit that reduces or eliminates the taxes that low-income working people pay (such as payroll taxes) and also frequently operates as a wage subsidy for low-income workers. ...


True flat tax

Lastly there is the "true" flat tax. It has never been proposed by a politician or public figure (probably out of fear of political backlash) but The Economist featured an April 14, 2005 article on its mechanics entitled The flat-tax revolution. If the idea of the personal deduction flat taxes proposed in the United States by the likes of Dick Armey and Steve Forbes is tax simplification via a reduction of "corporate welfare" through politicians handing out special deductions and for families to have the ability to send in their tax form on a postcard, then the true flat tax is the ultimate simplification. Under such a system, the flat rate would be applied to every dollar of taxable income and profits without exception or exemption. One possible benefit to such a system is that a situation may exist whereby nobody could be construed as receiving a favourable or "unfair" tax advantage. No industry receives special treatment, the family with 10 children does not receive special treatment, etc. Further, the cost of tax filing for both citizens and the government could be further reduced, as under a true flat tax there would be no need for the majority of Americans to send in an income tax form. Employers could simply withhold the flat tax amount and send it in themselves without their employees ever having to bother with forms. The Economist is a weekly news and international affairs publication of The Economist Newspaper Limited in London. ...


Fairness of taxation

This is a hotly debated issue with regards to flat taxes. Broadly, proponents of the flat tax claim it is fairer than progressive taxation, since "everybody pays the same". Opponents point out that for the state to raise the same amount of money under a flat rate tax requires that the rich pay less and the poor pay more than they would under a progressive tax system. Discussing the possible future introduction of flat tax in the UK, the journalist Neil Clark described it as "a far-right wheeze that would leave, according to a Treasury report, up to 30 million Britons worse off and the super-rich even richer" in an October 2005 Guardian article [4] [5]. A progressive tax, or graduated tax, is a tax that is larger as a percentage of income for those with larger incomes. ... The Guardian is a British newspaper owned by the Guardian Media Group. ...


However, this may also depend on what tax deductions are removed from the tax system when a flat tax is introduced and which people profit the most from those tax deductions.


Other issues

Besides the general and most widely-argued issue of which tax system is the fairest to both high and low income earners, there are several other arguments in favor or against a flat tax.


Arguments in favor

Simplicity

The enactment of a flat tax system simplifies the tax code by only taxing income at its source. The U.S. tax code for example is currently over 9 million words long and contains many loopholes, deductions, and exemptions that - proponents of flat-tax claim - complicate and create inefficiencies in tax collection. It is argued that the system in its form stifles economic growth by distorting economic incentives and allowing and encouraging tax evasion. With the transparency of a flat tax, there are fewer incentives to create tax shelters and avoid paying one’s share.


The simplest form would clearly be the pure flat tax without deductions. An article in The Economist [6] points out that it would be possible for companies simply to deduct the flat rate from their entire pool of taxable income and send it in to the government along with a check for the flat rate on their profits. As an example, say that in 2005, ACME makes $3 million in profit, spends $2 million on salaries and wages, and a further $1 million on other expenses that the IRS treats as taxable income, such as stock options, bonuses, and certain executive privileges. If the flat tax rate was 15%, the company need only withhold that percent of the listed expenses and send in a single check for $450,000 to the IRS. Most of their employees wouldn't have to send in a check of their own. They would only have to if they made an outside income from personal ventures. Even if one made money on an equity transaction regarded as "short term capital gains" which is taxed at normal income tax rates, the brokerage could withhold 15% of the difference and send it in with their taxes. The Economist points out that such a system would reduce the number of filers that need to send in tax forms from the current 130 million individuals, families, and businesses, to a mere 8 million businesses.'


Double taxation

Regarding the tax structure, proponents also note that a flat tax is one method of eliminating double taxation. They therefore claim that this is another way in which flat taxes are fairer than progressive tax systems currently in use. It would be a benefit to retired people collecting from personal savings accounts, corporate dividends, and capital gains, all of which would already have been taxed at the corporate income level. Furthermore, suggest that social security benefits (a tax in itself) would also become free of taxation. Finally, it is proposed that estates taxes, also known as the “death tax”, would be phased out allowing more wealth to be bequeathed to family members.


Height of tax revenues

Some proponents of a flat tax claim that it will result in higher revenues for the government, by simplifying the tax code and removing certain loopholes currently used by corporations and the rich to pay less taxes. The Russian Federation, for example, saw real tax revenues from the Personal Income Tax rise by 25.2% in the first year after the introduction of the flat tax, followed by a 24.6% increase in the second year and a 15.2% increase in the third year [7].


Minor arguments

It is argued that the governments' cost of processing tax returns would become much smaller since the relevant tax bodies could be abolished or massively downsized. Currently, Germany for example spends 3.7 billion euros per year on this. However, this is only 0.14% of the GDP of Germany. Countries by nominal GDP (2004) using both lists This article includes two lists of countries of the world sorted by their Gross domestic product (GDP), the value of all final goods and services produced within a nation in a given year. ...


It is also argued that a flat tax will help lessen the issue of outsourcing that has become a problem in recent years, because businesses will be able to pay taxes easier with a simpler tax code and will have to deal with less IRS regulation.


Finally, charitable giving may be helped by a flat tax in that people are able to give more when their incomes are higher. A survey conducted ranked tax deduction #7 in a list of reasons people have for donating money to worthy causes.


Arguments against

Overall tax structure

Since most other taxes (sales taxes etc.) tend to be regressive in practice, it is claimed that making the income tax flat will actually make the overall tax structure regressive (i.e. lower-income people will pay a higher proportion of their income in total taxes compared with the affluent). To meet Wikipedias quality standards, this article or section may require cleanup. ...


Opponents note that by limiting the flat tax to paid wages, wealthier people who earn proportionally more money from investments and savings are not taxed for their additional revenue at all; similarly, the loss of deductions means that some tax reliefs for the middle class will disappear. The wealthy would actually be paying less, as a percentage of their monetary gains, than the less wealthy. Therefore, opponents point out that the flat tax is deceptively advertised as fair, when in fact it shifts the tax burden off the upper class onto the middle class -- the real issues are deductions and what money counts as "income", not where the tax brackets are set.


Influence on particular investments

Through tax deductions, the state can stimulate investments in, e.g., renewable energies or other things it considers worthwhile. In a flat tax system without deductions, the state no longer has this option.


Flat tax isn't working in Eastern Europe

To demonstrate its benefits, proponents of flat tax use the largely former-Communist countries of Eastern Europe as examples , several of which have adopted the system. Some of these nations, particularly the Baltic Countries, have experienced exceptional economic growth in recent years. However, there is a growing disconcern with the effect that flat rates of taxation are having on these countries, both socially and politically, and arguments have been made that flat tax has had less influence on economic growth than previously thought. Communism - Wikipedia /**/ @import /w/skins-1. ... Current division of Europe into five (or more) regions: one definition of Eastern Europe is marked in orange Eastern Europe as a region has several alternative definitions, whereby it can denote: the region lying between the variously and vaguely defined areas of Central Europe and Russia. ... The Baltic Sea The terms Baltic countries, Baltic Sea countries, Baltic states, and Balticum refer to slightly different combinations of countries in the general area surrounding the Baltic Sea. ...

  • Lithuania has experienced amongst the fastest growth in Europe, and levies a flat tax rate of 33% on its citizens. Advocates of flat tax talk of this country's declining unemployment and rising standard of living. They also state that tax revenues have increased following the adoption of the flat tax, due to a subsequent decline in tax evasion and the Laffer curve effect. Others point out, however, that Lithuanian unemployment is falling at least partly as a result of mass emigration to Western Europe. The argument is that Lithuania's comparatively very low wages, on which an overly regressive flat tax regime is levied, combined with the possibility now to work legally in Western Europe since accession to the European Union, is forcing people to leave the country en masse. The Ministry of Labour estimated in 2004 that as many as 360,000 workers may have left the country by the end of that year, a prediction that is now thought to have been broadly accurate. The impact is already evident: in September 2004, the Lithuanian Trucking Association reported a shortage of 3,000-4,000 truck drivers. Large retail stores have also reported some difficulty in filling positions [8].
  • Again in Lithuania, it has been argued that whilst a new urban elite is certainly emerging in the country, poverty remains rife, average salaries pitifully low and that for the vast majority of people things have not markedly improved. According to a report published by the US Department of State in October 2005, the minimum wage increased in 2005 to $197.50 per month (the first rise since June 1998), well below the poverty threshold. The average wage stands at $458 per month [9], [10].
  • It has been said that whilst in most countries the introduction of a flat tax has coincided with strong increases in growth and tax revenue, there is no proven correlation between the two. A study by the IMF showed for instance that sharp increases in Russian GDP growth and tax revenue around the time of the introduction of a 13% flat tax were not the result of the tax reform, but of a sharp increase in oil prices, strong real wage growth and an intensification in the prosecution of tax evasion [11].
  • In Estonia, which has had a 26% flat tax rate since 1994, studies have shown that the significant increase in tax revenue experienced was caused partly by a disproportionately rising VAT revenue [12]. Moreover, Estonia and Slovakia have high social contributions, pegged to wage levels [13]. Both matters raise questions regarding the justice of the flat tax system, and thus its long-term viability. The Estonian economist and former chairman of his country's parliamentary budget committee stated in September 2005 that "income disparities are rising and calls for a progressive system of taxation are getting louder - this could put an end to the flat tax after the next election" [14].

In economics, a person who is able and willing to work at prevailing wage rate yet is unable to find a paying job is considered unemployed. ... t* represents the rate of taxation at which maximal revenue is generated. ... A common understanding of Western Europe in modern times Western Europe was largely defined by the Cold War, with the Iron Curtain separating it from Eastern Europe (Warsaw Pact countries). ... The European Union (EU) was originally created by the six founding states in 1952, but has grown to its current size of 25 member states. ... The United States Department of State, often referred to as the State Department, is the Cabinet-level foreign affairs agency of the United States government, equivalent to foreign ministries in other countries. ... The flag of the International Monetary Fund (IMF) The International Monetary Fund (IMF) is the international organization entrusted with overseeing the global financial system by monitoring foreign exchange rates and balance of payments, as well as offering technical and financial assistance when asked. ... The term real wages refer to wages that have been adjusted for inflation. ... Value added tax (VAT) is a sales tax levied on the sale of goods and services. ...

Race to the bottom

The argument that rich people, or corporations, might move to countries with lower taxes is difficult to argue against in the context of any one country, though it is, perhaps, sometimes overstated - critics ask how many wealthy people would really choose to uproot their lives just to pay slightly less tax. Still, some people claim it might lead to a race to the bottom in which countries compete to offer ever-lower taxes for the rich, so that the rich become ever richer, while the poor and middle classes, who are less mobile, are left to shoulder the entire cost of all government services, which themselves are subject to ever-worsening under-funding and neglect. In government regulation, a race to the bottom is said to occur when competition between nations (over investment capital, for example) leads to the progressive dismantling of regulatory standards. ...


Opponents of lower taxes for the rich argue that the predictable end result of the race to the bottom is complete social collapse (see also failed state), a situation from which even the richest people in society will derive no benefit. In order to prevent this, they argue, it is the responsibility of local and national governments everywhere to ensure that the rich continue to pay a fair share of the tax burden. Schemes such as "flat rate taxes", therefore, are said to be irresponsible at a global level, even if they may seem to offer the prospect of a temporary advantage at a national level. Failed state is a controversial term intended to mean a weak state in which the central government has little practical control over much of its territory. ...


The value of money

By considering the value of money to various groups rather than looking simply at the rate of taxation, it could be argued that the flat tax would have a negative impact on the poor. While the monetary value of a dollar (or other unit of currency) is the same for everyone, it is argued that it is "worth" a lot more to someone who is struggling to afford food than to a millionaire.


See also

A progressive tax, or graduated tax, is a tax that is larger as a percentage of income for those with larger incomes. ... To meet Wikipedias quality standards, this article or section may require cleanup. ... An income tax is a tax levied on the financial income of persons or corporations. ... The FairTax Book, co-authored by Neal Boortz and John Linder, was published on August 2, 2005, as a tool to increase public support for the FairTax Plan. ... The National Economic Stabilization And Recovery Act or NESARA is a proposal for legislation to reform the fiscal policy, monetary policy, and monetary system, of the United States of America. ... Value added tax (VAT) is a sales tax levied on the sale of goods and services. ...

External links

  • Forbes, Steve (2005). Flat Tax Revolution. Washington, DC: Regnery Publishing, Inc. ISBN 0-89526-040-9
  • Editorial - "Legacy Time: Get to Work on the Flat Tax"
  • The original and authoritative Hall and Rabushka flat tax

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