Citizens for Tax Justice has a new report on the "flat tax" proposal introduced in each session of Congress since 1995 by Senator Arlen Specter of Pennsylvania. This single-rate tax would replace the existing progressive personal income tax, as well as the corporate income tax and estate tax.
The Specter plan is based on the “Flat Tax” first proposed in a 1983 book by Robert Hall and Alvin Rabushka. The Flat-Tax authors wrote that it “will be a tremendous boon to the economic elite” and also admitted that “it is an obvious mathematical law that lower taxes on the successful will have to be made up by higher taxes on average people.”
Our analysis of the Specter plan confirms this is true. We find that Senator Specter’s flat tax will result in:
- Enormous tax cuts for the richest five percent of taxpayers, including an average tax cut of $209,562 for the richest one percent in 2010.
- Tax hikes for all other income groups. The bottom 95 percent of taxpayers would pay an average of $2,887 more in federal taxes in 2010.
- Low-income Americans would lose the refundable credits that they receive under the current income tax.
- The form of income that mostly flows to the wealthy — investment income — would be exempt from the personal income component of the flat tax, while all compensation for work, including wages and even employer-provided health care benefits, would be taxed.
- There would be little simplification in taxes for the majority of Americans.