![]() ![]() ![]() Whereas the flat tax would tax all income at the same percentage, the FairTax wouldn't tax income at all - it would instead institute a national sales tax. Were the government to revamp the system to change this, the argument goes, all would benefit from a more prosperous economy in the long run.Īlthough they both have similar goals and would entail significant overhaul of the current system, the plans differ is some fundamental ways. In relation to this criticism, opponents claim that this burden discourages behavior that would promote economic growth. Others go further, saying that the progressive tax system is inherently unfair, as it puts an excessive burden on the wealthy. Even the Internal Revenue Service (IRS) Commissioner has admitted that complexity of the tax code contributes to both honest mistakes and tax evasion. Many critics consider the tax code confusing and impossible for the average taxpayer to decipher - often requiring a hired professional. The federal government taxes a corporation's profits in a similar way. Taxable income can also depend on how much you've earned in capital gains or on specific deductions and exemptions that apply. ![]() Specifically, the current system uses margins - also known as tax brackets, or ranges of income - to determine what percentage a person pays. As it stands, Americans pay a progressive income tax - meaning that higher incomes get taxed at higher percentages than lower incomes. To better understand how each plan would change things, we first have to know the basics of the current system and the major criticisms of it. ![]() But as you hear names thrown around and see bumper stickers promoting one or the other, you may have been confused about what exactly the differences are between the two. In the 2000 presidential campaign, Green Party candidate Ralph Nadar supported the flat tax, and in the 2008 campaign, Republican Mike Huckabee threw his favor behind the FairTax. You've probably heard talk of these plans in the media. ![]()
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