There are three reasons we should consider a flat tax:
1) It is simple - How much time have you spent filling out your Social Security returns? None. Why? Because it is a simple flat tax.
2) It doesn't require significant collection efforts. Sales taxes require a fair amount of paperwork by the collector (i.e. retailer) to report and remit. Plus, depending on what is exempted, it could be very complicated and prone to abuse and fraud.
3) It can be as fair or progressive as we want it to be. Consider these two scenarios.
A 10% tax on everything over $25,000:
A person making $25,000 or less would pay no tax
A person making $50,000 would pay $2,500 (10% of $25,000) or 5% of their total pay.
A person making $100,000 would pay $7,500 or 7.5%
A person making $1,000,000 would pay $97,500 or 9.75%
A 20% tax on everything over $50,000:
A person making $50,000 or less pays nothing.
A person making $100,000 pays $10,000 or 10%
A person making $1,000,000 pays $190,000 or 19%
As you can see, we can set the rate and the exempted amount wherever we would want to get the effective rate desired for various income levels. In example 2 above, the person making $1,000,000 makes ten times the person making $100,000, but pays 19 times more in taxes. Still, he pays no more on each incremental dollar than anyone else. It achieves both progressivity and fairness.
