Title: Flat tax | economics | Britannica
Headings: Flat tax
Flat tax
economics
Advantages of a flat tax
Criticisms of the flat tax
Flat tax

Content: A third advantage cited by flat tax supporters is economic stimulus. Removal of the highest income tax rates, they argue, would motivate people to work more, earn more, save more, and invest more, resulting in economic growth that benefits everyone. Some flat tax proposals have included the elimination of all taxes on dividends, interest, and other unearned income as an additional economic stimulus, although such features are not an essential part of a flat tax system. Flat tax opponents, however, have argued that it is doubtful that a flat tax would produce significant economic growth. Get a Britannica Premium subscription and gain access to exclusive content. Subscribe Now
Criticisms of the flat tax
The main criticism leveled against the flat tax is that it is unfair. Such a system, say opponents of the tax, would result in a windfall for the rich and higher tax burdens for the poor and the middle class, who are less able to afford them. Defenders of a flat tax argue that the beneficial effects of a progressive tax system could be maintained through generous personal exemptions. A second criticism is that a flat tax would cause shortfalls in the government’s budget by lowering the taxes paid by the wealthy. Flat tax supporters counter that the economic growth resulting from a flat tax would generate additional tax revenue that would more than make up for the revenue lost from lower tax rates.