flat tax

noun

Definition of flat tax

Examples of flat tax in a Sentence

Recent Examples on the Web

Here’s one — even just the 1 percent increase in the flat tax would be monumental to a working mother on a marginal income. Chicago Tribune, Lake County News-Sun, "Talk of the County: Hope you liberals are happy with the 'tax-and-spend idiot billionaire' governor," 10 June 2019 Austin Beutner defended the tax’s square-foot formula, calling it more equitable for lower-income households than a flat tax per parcel, as some other school systems have done. Howard Blume, latimes.com, "Parcel tax for L.A. schools is latest ask of taxpayers," 4 June 2019 If the majority gets to set a flat tax rate and share the revenue equally among all voters, then when incomes are especially unequal, the majority should set the rate higher. Daniel Treisman, Washington Post, "Why the poor don’t vote to soak the rich," 27 Feb. 2018 Russian Sanctions Salvini wants a 15-percent flat tax and favors protectionist tariffs, though has backtracked on opposition to the single currency. Bloomberg.com, "Populist Salvini’s Provocations Drive His Appeal Across Italy," 5 Mar. 2018 Illinois has been a fiscal mess for years, but a saving grace has been that the state Constitution mandates a flat tax rate that is now 4.95% on personal income. The Editorial Board, WSJ, "Pritzker’s Illinois Exit Ramp," 15 Mar. 2019 But other parts of the Italian budget deserve support—in particular the two-rate flat tax proposed by League leader Matteo Salvini, which is the best shot at supply-side tax reform Italy has had in recent memory. The Editorial Board, WSJ, "Europe’s Growth Problem in Italian," 23 Oct. 2018 Yet the Democratic candidate for Governor, J.B. Pritzker, and unions are now campaigning to kill the state’s flat tax rate and raise taxes again. The Editorial Board, WSJ, "Why Your Pension Is Doomed," 19 July 2018 Thanks to his party, the coalition agreement includes its one economic bright spot, a nearly flat tax that would apply only two rates, at 15% and 20%, to both personal and corporate income. The Editorial Board, WSJ, "Italy Drives in Reverse," 18 July 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'flat tax.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of flat tax

1952, in the meaning defined above

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15 Jun 2019

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The first known use of flat tax was in 1952

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More Definitions for flat tax

flat tax

noun

Financial Definition of flat tax

What It Is

A flat tax is a system under which all taxpayers pay taxes at the same percentage rate of their total income.

How It Works

Let's assume that you had $100,000 of taxable income last year. Under a progressive tax system, you might be taxed 0% on the first $25,000, 10% on the next $50,000, and 30% on the remaing $25,000, for a total tax bill of (0 x $25,000) + (0.10 x $50,000) + (0.30 x $25,000) = $12,500. Under a flat-tax system, you might instead simply owe, say, 15% of your taxable income, or $15,000.

[InvestingAnswers Feature: The Most Important Tax Changes to Know Before Filing Your Tax Return]

Why It Matters

The concept of a flat tax is controversial, and many economists and politicians have introduced many different twists and forms of the idea. In many proposals, the flat tax would not apply at all to incomes below a certain amount.

Supporters say flat taxes incent people to work harder, earn more, and engage in wealth-creating activities because the current progressive system penalizes people who make more money (by putting them in higher tax brackets and thus taxing that incremental income at a higher rate). In this vein, supporters say a progressive tax system does not encourage entrepreneurship. Supporters also say the current tax system is too complicated, and that the system of credits, deductions, exemptions, etc. offers too many loopholes with which to take advantage of the system.

The notion of whether the flat tax is "more fair" is perhaps the most controversial aspect of the idea. Under the system, a person with 100 times more income would pay 100 times more in taxes, but that person would be paying the same percentage of his income in taxes as a low-income person would pay.

[InvestingAnswers Feature: How to Avoid an IRS Audit]

Source: Investing Answers

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