Flat Tax and Fair Tax Essay Example

The federal income tax was established in 1913 and since then it has become so complex that it requires millions of Americans to seek professional help every year. In addition to that, an expensive federal bureaucracy is required to enforce and administer the tax. The tax law was created to provide programs and services to the people that people wouldn't want to pay for themselves. And through the tax system, we pay for these services that the government provides us. As much as a tax system is needed, many people believe that the income tax system can penalize work, discourage saving and investment, and hinder the competitiveness of business. There have been many efforts and debate about simplifying the tax law, and among the most popular plans are the fair tax and the flat tax. In this paper, I will talk about the features of each tax system and discuss some of the advantages and disadvantages of both proposals while concurrently comparing them to our current tax system.
The flat tax charges all household incomes and corporate profits at the same flat marginal rate. The main advantages of the flat tax are its fairness, simplicity and potential growth. First, the flat tax would be perceived as fair because everybody pays the same marginal rate on their income. One great feature of the flat tax is that families would only be allowed one personal deduction and all other deductions like mortgage interest, donations and credits would be eliminated. Individuals would be able to deduct a personal exemption based on family size from their gross income and anything in excess of the deduction would be paid at the marginal rate. Those with gross incomes below the personal exemption would end up paying no taxes at all. Also, in the absence of tax filing, the opportunities for tax breaks, like deductions and credits, would diminish. Another advantage is that the flat tax would make the tax system a lot simpler to deal with. Most individuals and businesses would fill out a