How Would the Flat Tax Work?
For many Americans, the flat tax means simply that everyone would be taxed at “just one rate.” Even though the 17 percent tax rate is a key feature of the flat tax1, it would be only one element of the comprehensive reform.2The flat tax eliminates inequalities in the current tax code by treating all taxpayers–and income–equally. With the exception of exemptions based on family size, all income would be taxed, but only one time. For fairness and simplicity, there would be no deductions, credits, preferences, or loopholes. To achieve even further simplicity, taxes on most business and capital income (such as dividends and interest payments) would be withheld and paid at the business level. The leading legislative proposal to create a flat tax is sponsored by House Majority Leader Richard Armey and Senator Richard Shelby (R-AL). Under the flat tax, the current Internal Revenue Code’s 480 forms would be replaced by two simple postcard-size forms. Individual taxpayers would receive a gene
