What is the flat tax? Q.What is the flat tax? A.While any tax system with flat rates could be called a flat tax, the name is usually reserved for a system developed by Robert Hall and Alvin Rabushka in 1985. Their flat tax is really a two-part VAT: All value added except wages is taxed at the business level and wages are taxed at the individual level at the same flat rate but with an exemption related to family size. Read more about What is the flat tax?
What is the difference between marginal and average tax rates? Q.What is the difference between marginal and average tax rates? A.Average tax rates measure tax burden, while marginal tax rates measure the impact of taxes on incentives to earn, save, invest, or spend. Read more about What is the difference between marginal and average tax rates?
What policy reforms could simplify the tax code? Q.What policy reforms could simplify the tax code? A.Reducing the number of distinctions among economic activities and taxpayers’ characteristics would simplify the code, reducing both taxpayers’ compliance costs and governmental administrative costs. Some distinctions among taxpayers promote fairness, so there are trade-offs among goals, but the tax law could be simplified without compromising equity. Read more about What policy reforms could simplify the tax code?
