To clarify the biggest difference between these two plans, it is important to understand why it matters where taxes are levied. The Flat Tax Taxes Income While the FairTax Taxes Consumption With both of these tax plans appearing to have so many similarities, it is important to note some differences. Corporations would pay the same taxes as everyone else, just as the rich would. The FairTax proposes to levy a 23% inclusive tax on all goods and services, meaning that a cart of groceries today costing $77 before tax will cost $100 with the FairTax. The FairTax has a flat rate as well, but it does not apply to income. This rate would also apply to corporations. The Flat Tax will tax all income above $25,000 for singles and $30,000 for families of four or more at a rate of 15%. Investment and production.The Flat Tax and FairTax are thought of by many civic-minded people. If the tax becomes high, it can be discourage saving.Maintenance of account and following rules becomes difficult which can give rise to the arbitrary decision of the tax officials.It gives rise to tax evasion and avoidance which are not compatible with the discharge of civil responsibility.Taxpayers in some cases remain hostile to the government as payment is direct from his income and pocket.There are allegations about harassment of taxpayers by the tax administration.As a result, taxpayers face difficulties. In most of the cases, tax provisions are ambiguous and not simplified one.It is difficult to define income and some confusion always remains there.It can be used as an instrument of fiscal policy to control and direct economy in the desired direction.Īrguments against income tax are discussed below –.With a chance of rate quantum of revenue can be increased or decreased.It ensures canon of certainty, thus budget estimates in this regard become a reality.As it is a direct tax it can be easily administered and cost of administration become low.Redistribution of income for social justice can be ensured.It can be imposed on the basis of ability to pay.

In short, it is a certain percentage of your income that you have to pay regularly to the government.Īrguments for income tax are discussed below – It is applied to both earned income (wages, salaries, and commission) and unearned income (dividends, interest, and rents). An income tax is a government tax on the taxable profit earned by an individual or corporation.

Flat tax arguments