How would a flat tax affect small businesses?
Author InfoJohn E. Golob Abstract The U.S. Congress is considering several strategies to reform the federal income tax system. The most widely discussed strategy, a flat tax, would tax income received by businesses and individuals at the same low, flat rate. Flat tax proposals would eliminate most tax deductions and tax credits but would increase the personal exemption for individual taxpayers. While the debate continues over whether a flat tax would be fair to individual taxpayers, assessing the effect of a flat tax on economic growth and business activity is also important.> Most economists who analyze tax incentives conclude that a flat tax would encourage economic growth, which would have a positive effect on businesses in general. The effects on businesses would not be uniform, however, and many small businesses would be affected differently than large businesses. Small businesses are an important component in the U.S. economy, producing about half of private sector output and emp
