Flat Tax

Deficiencies of the Current Tax System

During the last several years, it has become increasingly evident that a great many Americans are disillusioned with the current income tax system. A March, 1995 Yankelovich poll for Time/CNN showed that of those surveyed, 80 percent said they believed that the current system of exemptions and deductions favored the rich, 34 percent favored making major changes to the tax code and another 22 percent wanted to replace it entirely (McNamee, 1994, p. 85). The current system was summarized by the Economist as follows: "It is riddled with exemptions for everything under the sun; it stifles investment and entrepreneurship; and it is beastly to comply with" (A better way to pay, 1996, p. 32). Estimates of the annual costs of

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ersed. Historically, Americans have paid their taxes. The second principal advantage of a flat tax is that it would embody a fundamental concept of fairness in that all types of income, regardless of their source, would be taxed at the same rate. Almost all proposals would allow threshold exemptions and deductions for low income taxpayers. Armey-Shelby would permit a combination of exemptions and deductions which would effectively shield the first $33,000 of taxable income of a family of four from tax, Forbes $36,000. The flat tax is in reality a tax on consumption which, without some such exemptions and deductions, would have an especially regressive impact on lower income taxpayers who save little. It has been alleged that the flat tax would disproportionately benefit wealthier taxpayers since interest, dividends and capital gains would be taxed only once, at the corporate level (Pollack, 1995, p. 20). However, no other form of income is presently double taxed. The impact of the flat tax on businesses would vary according to their type. Growth industries which make heavy investments in research and development and capital equipment should come off best. The preferences currently allowed to certain industries, such as oil and g
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Approximate Word count = 2227
Approximate Pages = 9 (250 words per page)

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