Should the United States Implement a Flat Tax?

Larson Fisketjon, Stewart AM, Honorbound

This question has been debated by many political leaders throughout the years. A flat tax is defined as “a tax on household income, taxes at a uniform rate, regardless of income level” [2]. This means that all people will be taxed the same amount of money no matter how much their income is. Some people see the flat tax as something beneficial to the economy. According to Chron, “One tax rate makes for easy computation by the Internal Revenue Service and straightforward payments from taxpayers [and] because the flat tax taxes only one income, it is easier to understand and to report” [2]. It is also seen as something beneficial to the economy because it is no longer necessary for individuals to pay interest and because “this tax system does not discriminate on income level; everyone pays the same amount per income” [2].

But some people see taxation as being done in a different way: progressive taxation. According to Naked Economics, the progressive tax “falls more heavily on the rich than the poor” [1]. This brings in the question of whether or not the rich should be taxed more than the poor due to their increased income and ability to contribute more money to the society. Some would agree that yes, the rich should be paying a higher percentage of their income in taxes, but what problems would come from that taxation inequality?

Inequality in taxation could lead to a lower incentive to work and make large amounts of money because of the impending tax that would take a substantial amount of that money that was earned from such hard work. This could lead to a loss of competition in the business world and thus, a loss in jobs – sending the whole economy into chaos. This is where a flat tax would be useful and smart. If everyone is paying the same amount of their income in taxes, there would be more incentive to create competition and to innovate in order to make more money. But this is only showing the benefits created for the wealthy.

The poor are impacted in a completely different way by the flat tax. Because they are making less income, that percentage of income that they are required to pay for taxation is much more difficult to pay from weeks or months work than that of a wealthy person. So though there is taxation equality, it leaves people with a lower income with a disadvantage. This is the reason that this problem is so highly debated by political figures and people in the economic and stock world.

A country in Eastern Europe called Estonia implemented a flat tax in 1994. When they had first implemented this tax, they had discovered that it created economic stability and success, but it eventually led to economic difficulties. According to country’s leader, “the tax revenue does not cover state level costs, or the expense of providing welfare to low-income citizens” [2]. Meaning that if the rich were taxed a higher percentage of their income, the country as a whole would be better off because they would have much higher economic stability, proving that the flat tax should not be implemented in order to benefit the economy as a whole.

[1] Wheelan, Charles J., and Burton G. Malkiel. Naked economics: undressing the dismal science. New York: W.W. Norton & Company, 2012.

[2] Meehan, Colette L. “Pros & Cons of a Flat Tax.” Chron.com. Accessed June 26, 2017. http://smallbusiness.chron.com/pros-cons-flat-tax-4210.html.

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