However, in the case of a flat tax model with basic allowance of the average tax rate is progressive, which can be interpreted as a redistribution of income. In the pure flat tax with no tax-free allowance, there is no redistribution.Īll income will be taxed at the same average tax rate, which is identical to the marginal tax rate.

The flat tax is usually associated conceptually with the extensive elimination of subsidies and tax breaks in order to achieve sufficient tax revenues at low tax rate. Hall and Alvin Rabushka again have a flat tax proposed. The concept of flat- rate tax was proposed in 1920 by Dennis Milner.

Without basic allowance so there is no tax progression.Ī flat tax with a basic allowance calculation leads to an indirect Progression: While the marginal tax rate remains the same, the average tax rate increases with income and approximates the marginal tax rate. The marginal tax rate is constant, thus the input and top tax rate are identical. With flat tax (short for flat rate tax ) or unit control a single-step income tax rate is referred to.

Argument for flat tax