econ-journal18 - flat tax, a 20 percent rate would cost...

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Duc Hoang – ECON210 Journal – Flat Tax   Date 10/10 Many people would like you to believe that flat tax is so named because it will  flatten your finances. That at the least is the intended conclusion. According to  the Foundation Studies on Flat tax of Heritage website, by eliminating personal  deductions like mortgage interest payments, the flat tax would reduce housing  values in this country by upwards of 10 percent.   The flat tax also appears to have a major fairness problem. For example consider  two families. The Jones have a combined salary of $50,000 in wages. Under the 
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Unformatted text preview: flat tax, a 20 percent rate would cost this family $3,700. Now consider the Smiths, who in retirement consume every dollar of their $1 million in dividend income. Under the flat tax, the Smiths owe no tax at all because capital income is excluded from the tax base. To be sure, their extra income was taxed at least once at the business level before they received it. But the perception would persist that a high income family would pay no tax....
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