- A flat tax differs from the current tax structure. Instead of taxing income in a progressive manner, a flat rate is assessed against businesses and individuals, which requires two basic taxing levels. One level of tax would be for individuals This rate would be consistent and flat for all individuals. The other level would be a business tax. This tax, again, would be consistent for all businesses in America.
- Preferential treatment is not given to any particular business with a flat tax. Instead of allowing tax breaks or deductions, businesses keep all of their income until they receive their tax bill. All gross receipts are added up, and deductions are made for operating expenses of the business. Finally, a flat percent is assessed on this remaining amount.
- Some businesses would benefit from having a flat tax rate since the tax on corporate earnings, as such, would be eliminated. Double taxation of corporate earnings also would be eliminated. If a corporation would otherwise have to pay a large income tax bill, the flat tax could reduce the total tax and encourage reinvestment in the business.
- The effect of the flat tax would be to simplify the tax code. Proponents of the flat tax claim this would bring in sufficient revenue for the country. The tax would represent a major overhaul of the current system and would also require a transition in all accounting departments of all corporations. Some businesses may be negatively affected. For example, with a simplified tax code, an tax accountant or tax attorney may be of lesser value. In many instances, a tax accountant would be unnecessary when the time comes to file tax returns.
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