What are the arguments against a flat tax?

Question

I know the arguments for a flat tax, but have never really seen a coherent argument about why such a flat tax system would be bad. I've puzzled over why our current convoluted system is good for anyone other than tax accountants. Can you give me a cogent argument for the current system instead of a simpler flat tax? (Please remain civil. I am going to be a hard sell here, since I already believe the flat tax would make more sense. A convincing argument will have to be thoughtful and provide facts. Name calling won't help me understand your point of view. I've made mistakes or had lapses in information before, and as a result have changed my mind. I can be convinced if you provide a solid answer.)

Musicality - I appreciate your answer, and I agree with your observations about the prior answers. I tried to write the question clearly, but it didn't make a lot of difference. I'm glad that a handful of the answers were clear and clearly to the point.

For all of you who are giving thoughtful and fact-based answers, I do appreciate the time and effort.

Truthsfifth – the ironic tone isn’t helping me, but thank you for reporting the poster with the hate-filled speech.
Samantha, Opinionated Kitte– most flat tax proposals have a lower limit, just as most progressive taxes do. Your minimum wage earner probably will not be affected in either plan. But what about the school teacher earning $40,000? She’s going to pay about 23 to 27% now, and only ….say….$10% under a flat tax. How is that not better? You haven’t answered the question.
Shortbus, off topic---in fact, I can’t see what topic you are on.
Truth seeker – I didn’t ask about the “Fair Tax”
Paul Revere – Off topic. Besides, I like public streets, public safety services, public fire protection, etc. I did not feel “sold out” the last time I pulled up to a working traffic signal. I’m sorry you did. I pay taxes.

Answer 1

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I can't speak for everyone who will possibly answer this question, but the answers that I've seen so far do one of three things:

1. They avoid the question altogether.

2. They confuse the flat tax with other things, like the Fair Tax.

3. They include things in the flat tax that would not be there if it were properly administered.

If I'm not mistaken, what you are talking about is a tax where every single person and corporation in the country pays a straight percentage (a FLAT percentage) of their income, say 5%. That way, most of the objections that the other answerers name would disappear.

For example, it would NOT result in rich people being taxed "the same" or less than poor people. If everyone paid 5%, then those who make more would pay more. Simple arithmetic.

It would NOT result in the rich taking advantage of numerous loopholes, because those loopholes only exist in the current tax plan. On a flat tax, there would be no loopholes. The tax return could be three lines long. 1 - How much did you make?
2 - How much is 5% of that? 3 - How much have you already paid? The difference between 2 and 3 is what you pay if it's a positive number (or are refunded if it's a negative number).

The Fair Tax, which is NOT the flat tax, would, indeed apply a huge sales tax to everything. But since there would be no other taxes, you would take home your entire paycheck, as opposed to the 60-80 percent that you take home now. I'd make that swap any day of the week.

Let's face it folks, no one likes to pay taxes, but everyone wants services from the government. If you buy into the idea that prosperous people should be punished for their success by having to pay more taxes than someone less successful, then the only fair way to levy taxes is to do it on a percentage basis so that everyone is inconvenienced at exactly the same RATE. Not the same amount, but the same rate. Poor people give up their 5%, but so do the rich.

Sorry, Arby, I can't come up with a cogent argument against the flat tax. I've been a proponent of it for years. Trouble is that so many special interest groups have such a vested interest in maintaining the status quo that it will probably never happen.
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Answer 2

A flat tax is neither progressive nor regressive, because the percentage rate is constant across income levels. This can also depend on which deductions, if any, the tax code allows. The argument that a flat tax is bad because poor people will have a harder time paying it is misleading. Virtually any tax code has a floor below which no taxes are collected. Also, poor people already pay lots of taxes (sales taxes, etc) and the taxes they pay are often regressive. For example, gasoline and cigarette taxes are quite high and they are regressive because consumption of these goods is not proportional to income. A flat tax could replace these other taxes, many of which are regressive. Of course, part of the justification for some taxes (such as the cigarette tax) is to discourage or encourage certain behaviors, so the regressive nature of the tax is often tolerated.

Answer 3

The basic economic argument against taxes is that they hurt the economy (people will have to pay the tax instead of buying that product x that they've been wanting, or even needing). Once taxes are instituted, however, tax cuts brake into two ideological groups: liberals/democrats, that believe the masses need the tax cut because they can barely make ends meet. Its a nice gesture. Conservatives/republicans believe that by giving tax cuts to the rich and corporations they can help the economy more (rich people and companies use all the money they get, in order to increase their business). Good idea, but looks really bad to the masses who are unfamiliar with economics. The current tax code is the result of decades of trying to tune the tax system to be the most efficient in not interfering witht he economy while giving the poor a brake, while lobbies all the while are trying to get what they want. So the idea is that you set the tax as high as you need it, and then try to help increase the economy by lowering the taxation. Since the economy is stronger, the government could gain more actual money than by leaving it alone.

Answer 4

Great question!!!
From my understanding countries that have gone to a flat tax system have experienced tremendous growth since the inception of the flat tax. The argument against the flat tax typically states that a formerly non-taxable income would become taxable and therfore the most impacted by a flat tax rate would be those who are economically challanged, (The poor). I think it would be interestring to put together a chart showing the impact on the middle and lower class compared with the expected economical growth.


Let me try ot clarify this. Currently a number of the lower economic classes pay none to very little taxes (especially students). A flat tax would eliminate this benefit to those who are in the most need while at the same time eliminating the loop holes currently in place which are utilized by the mega rich and corporations. I'm sure if any of you ahd to pay for your own college education you will remember the tax breaks you received. A flat tax would eliminate all tax breaks including those who make very little and those who are students (typically making very little).

I'm not saying I'm for or against a flat tax, I think it deserves a good long look at what the economic impact would be.


I do not support a federal sales tax. A number of people currently avoid sales taxesd by shopping on-line and making purchases out of the country, a national sales tax would only increase this.

Answer 5

Ive seen alot about this fair tax, and assuming you know the arguements for it, i'll tell you that i really do like it. in theory it's so much better than our current system...For instance i stopped working overtime because i would literally see nothing in return for all my hard work, but the fair tax will reward my hard working behavior...

but the arguement against the fair tax that i've heard is that it is possible that in conjunction to the flat tax the government at some point in the future can reinstall the income tax, and as a result we'll be taxed hugely through large sales tax and income taxes., furthermore, many local and state governments get their money from sales tax, and as a result they may tinker with their sales taxes to go higher if they want/need more money.


i think the fair tax is better than our current income tax system, so as long as safeguards can be built into this system to prevent the above and other things that i know not of, then we should at least give it a 12 year try. and see how we like it.

Answer 6

I'm not going to try to convince you, I'm just telling you what I think.

First of all it's impossible to implement a flat tax, and politicians who promise to implement it either know that or should know that. You might not be old enough to remember that Reagan's tax plan began as a 'flat tax', but by the time Congress finished fiddling with it, the tax code was more complicated than before.

There was a series of articles a few years ago done by the Philadelphia Inquirer called "America-Who Pays the Taxes". I think it won a Pulitzer. Some guys from this paper actually went through the US Tax Code, several thousands of pages. They found all kinds of 'favors' that senators and congressmen had done for special interests, big campaign contributors, and the big industries of their states. That's what makes the tax code so big and complicated. Many tax breaks written into the code were for one single company or even one single person! In fact this is the main way congresscritters compensate big contributors, by writing a tax break for them into the tax code.

So right away we get back to the biggest real problem with US politics, the importance of money. This is what happened to Reagan's tax 'reform'. In the end, most of us ended up paying MORE taxes because FICA contributions went up.

Now, as to the desirability of a flat tax. Conservatives used to like to say 'You can't tax a nation into prosperity'. It sounds good! But in fact if you look at our history, the BEST times were the times of progressive taxation. Most notably the 1950s. Schools were better, healthcare was cheap and accessible, we built the interstate highway system and vaccinated our kids. Because of the GI Bill, we had more college graduates than anyone in the world and single-family homes were more affordable than any time previously. This was all because of progressive taxation! Rich people GET more from government so they can afford to PAY more.

Of all the flat tax proposals I heard during the 80s and 90s, the only one I really liked was Jerry Brown's. He allowed people to deduct their home mortgage, but if they didn't have a home they could deduct their RENT! Also there was a smal 'wealth tax' for people who were worth more than a certain amount, up in the tens of millions of dollars.

More and more of the wealth of America is being concentrated in fewer hands. This has been going on since Reagan. The difference between a country like the US and a country like El Salvador is not the amount of wealth, it's the distribution of wealth. One of the main tools the govt. has used to do this is the tax code. EVERY tax 'reform' ends up shifting the burden of taxation off the rich and onto the middle class. Politicians who promise a 'flat tax', especially Republicans who promise it, are not really planning to give the middle class a break!

Answer 7

A porgressive tax even confers benefits to those producing goods and services for those with a low to midle income. A person who makes little, not taxed at a "Flat rate" may be able to buy a $7 movie ticket, providing income to those making movies.

Look at it like this: Person making $1million a year from a prospering business paying $500k in taxes is better off than than the same person making $600k a year from a far less prosperous business, but paying $180k in taxes.

People making 20k a year paying 6K in taxes are far less likely to buy many things, including things than can allow someone to make $1 million a year who would otherwise make 600k a year.

A tax can be too progresssive, of course, but a flat tax will serve to hurt even those with a high productivity and high income.

Answer 8

Someone how makes $100,000 a year can much easier afford to pay 10% of their income than someone who makes only $10,000. A graduated system is much fairer because it lightens the burden on those who make less. Any implementation of a flat tax would immediately shift much more taxes onto the middle and lower classes. And this is why wealthy republicans fight so hard for this issue. It's all about widening the gap between the haves and the havenots. The haves can never have enough to satisfy themselves.

Answer 9

In the case of the US, the federal government taxes too much, spends too much and always spends more than what is brought in. The form of tax is therefore not that relevant.

There are too many people with vested interests in the current tax system to get a wholesale change. People who don't pay taxes now, would have to pay tax under that system. The Democrats will not be able to make false promises to the poor, to buy their votes.

Answer 10

The misnamed FairTax is a national sales tax. Under the act promoted by AFT and now being considered by Congress, the federal government would impose a tax on all new goods and all services at the retail level. Proponents claim the tax would initially be 23 percent, but the federal government would actually add 30 percent to the cost of nearly everything you buy.

The FairTax is regressive – that is, the poorer you are, the more you pay, proportional to your income