GetWiki

{{For|the term related to tax incidence regarding flat progressivity|Proportional tax}}{{Use dmy dates|date=October 2019}}{{Taxation}}{{short description|Type of tax}}A flat tax (short for flat-rate tax) is a tax with a single rate on the taxable amount, after accounting for any deductions or exemptions from the tax base. It is not necessarily a fully proportional tax. Implementations are often progressive due to exemptions, or regressive in case of a maximum taxable amount. There are various tax systems that are labeled "flat tax" even though they are significantly different. The defining characteristic is the existence of only one tax rate other than zero, as opposed to multiple non-zero rates that vary depending on the amount subject to taxation.A flat tax system is usually discussed in the context of an income tax, where progressivity is common, but it may also apply to taxes on consumption, property or transfers.

Major categories

Flat tax proposals differ in how the subject of the tax is defined.

True flat-rate income tax

A true flat-rate tax is a system of taxation where one tax rate is applied to all personal income with no deductions.

Marginal flat tax

Where deductions are allowed, a 'flat tax' is a progressive tax with the special characteristic that, above the maximum deduction, the marginal rate on all further income is constant. Such a tax is said to be marginally flat above that point. The difference between a true flat tax and a marginally flat tax can be reconciled by recognizing that the latter simply excludes certain types of income from being defined as taxable income; hence, both kinds of tax are flat on taxable income.

Flat tax with limited deductions

Modified flat taxes have been proposed which would allow deductions for a very few items, while still eliminating the vast majority of existing deductions. Charitable deductions and home mortgage interest are the most discussed examples of deductions that would be retained, as these deductions are popular with voters and are often used. Another common theme is a single, large, fixed deduction. This large fixed deduction would compensate for the elimination of various existing deductions and would simplify taxes, having the side-effect that many (mostly low income) households will not have to file tax returns.

Hall–Rabushka flat tax

Designed by economists at the Hoover Institution, Hall–Rabushka is a flat tax on consumption.The Flat Tax, Robert E. Hall and Alvin Rabushka, Hoover Institution, 2 April 2007. Principally, Hall–Rabushka accomplishes a consumption tax effect by taxing income and then excluding investment. Robert Hall and Alvin Rabushka have consulted extensively in designing the flat tax systems in Eastern Europe.

Negative income tax

The negative income tax (NIT), which Milton Friedman proposed in his 1962 book Capitalism and Freedom, is a type of flat tax. The basic idea is the same as a flat tax with personal deductions, except that when deductions exceed income, the taxable income is allowed to become negative rather than being set to zero. The flat tax rate is then applied to the resulting "negative income," resulting in a "negative income tax" that the government would owe to the household—unlike the usual "positive" income tax, which the household owes the government.For example, let the flat rate be 20%, and let the deductions be $20,000 per adult and $7,000 per dependent. Under such a system, a family of four making $54,000 a year would owe no tax. A family of four making $74,000 a year would owe tax amounting to 0.20 × (74,000 − 54,000) = $4,000, as would be the case under a flat tax system with deductions. Families of four earning less than $54,000 per year, however, would experience a "negative" amount of tax (that is, the family would receive money from the government instead of paying to the government). For example, if the family earned $34,000 a year, it would receive a check for $4,000. The NIT is intended to replace not just the USA's income tax, but also many benefits low income American households receive, such as food stamps and Medicaid. The NIT is designed to avoid the welfare trap—effective high marginal tax rates arising from the rules reducing benefits as market income rises. An objection to the NIT is that it is welfare without a work requirement. Those who would owe negative tax would be receiving a form of welfare without having to make an effort to obtain employment. Another objection is that the NIT subsidizes industries employing low-cost labor, but this objection can also be made against current systems of benefits for the working poor.{{Says who?|date=April 2021}}

Capped flat tax

A capped flat tax is one in which income is taxed at a flat rate until a specified cap amount is reached. For example, the United States Federal Insurance Contributions Act tax is 6.2% of gross compensation up to a limit (in 2022, up to $147,000 of earnings, for a maximum tax of $9,114).Contribution and Benefit Base, United States Social Security Administration. This cap has the effect of turning a nominally flat tax into a regressive tax.Are Social Security taxes regressive?, The Economist, 14 April 2009.

Requirements for a fully defined schema

In devising a flat tax system, several recurring issues must be enumerated, principally with deductions and the identification of when money is earned.

Defining when income occurs

Since a central tenet of the flat tax is to minimize the compartmentalization of incomes into myriad special or sheltered cases, a vexing problem is deciding when income occurs. This is demonstrated by the taxation of interest income and stock dividends. The shareholders own the company and so the company's profits belong to them. If a company is taxed on its profits, then the funds paid out as dividends have already been taxed. It's a debatable question if they should subsequently be treated as income to the shareholders and thus subject to further tax. A similar issue arises in deciding if interest paid on loans should be deductible from the taxable income since that interest is in-turn taxed as income to the loan provider. There is no universally agreed answer to what is fair. For example, in the United States, dividends are not deductibleWEB,weblink When Is a Dividend Deductible?, CFO, 18 September 2008, 28 November 2009,weblink" title="web.archive.org/web/20100314160131weblink">weblink 14 March 2010, live, but mortgage interest is deductible.Publication 936 (2021), Home Mortgage Interest Deduction, 5 January 2022. Thus a Flat Tax proposal is not fully defined until it differentiates new untaxed income from a pass-through of already taxed income.

Policy administration

Taxes, in addition to providing revenue, can be potent instruments of policy. For example, it is common for governments to encourage social policy such as home insulation or low income housing with tax credits rather than constituting a ministry to implement these policies.Federal Income Tax Credits and Other Incentives for Energy Efficiency, Energy Star. In a flat tax system with limited deductions such policy administration, mechanisms are curtailed. In addition to social policy, flat taxes can remove tools for adjusting economic policy as well. For example, in the United States, short-term capital gains are taxed at a higher rate than long-term gains as means to promote long-term investment horizons and damp speculative fluctuation. Thus, if one assumes that government should be active in policy decisions such as this, then claims that flat taxes are cheaper/simpler to administer than others are incomplete until they factor in costs for alternative policy administration.

Minimizing deductions

In general, the question of how to eliminate deductions is fundamental to the flat tax design; deductions dramatically affect the effective "flatness" in the tax rate. Perhaps the single biggest necessary deduction is for business expenses. If businesses were not allowed to deduct expenses, businesses with a profit margin below the flat tax rate could never earn any money since the tax on revenues would always exceed the earnings. For example, grocery stores typically earn pennies on every dollar of revenue; they could not pay a tax rate of 25% on revenues unless their markup exceeded 25%. Thus, corporations must be able to deduct operating expenses even if individuals cannot. A practical dilemma arises as to identifying what is an expense for a business. For example, if a peanut butter producer purchases a jar manufacturer, is that an expense (since the producer has to purchase jars somehow) or a sheltering of income through investment? Flat tax systems can differ greatly in how they accommodate such gray areas. For example, the "9-9-9" flat tax proposal would allow businesses to deduct purchases but not labor costs, which effectively taxes labor-intensive industrial revenue at a higher rate.Herman Cain's 9-9-9 Tax Plan, Edward D. Kleinbard, Social Science Research Network, 24 October 2011. How deductions are implemented will dramatically change the effective total tax, and thus the flatness of the tax. Thus, a flat tax proposal is not fully defined unless the proposal includes a differentiation between deductible and non-deductible expenses.

Tax effects

Diminishing marginal utility

Flat tax benefits higher income brackets progressively due to decline in marginal value.The Consumer: Marginal Value, Marginal Utility, and Consumer Surplus, Price Theory: An Intermediate Text, David D. Friedman, 1990. If a flat tax system has a large exemption, it is effectively a progressive tax. As a result, the term "flat tax" is actually a shorthand for the more proper marginally flat tax.

Administration and enforcement

One type of flat tax would be imposed on all income once; at the source of the income. Hall and Rabushka proposed an amendment to the U.S. Internal Revenue Code that would implement the variant of the flat tax they advocate. This amendment, only a few pages long, would replace hundreds of pages of statutory language (although most statutory language in taxation statutes is not directed at specifying graduated tax rates).As it now stands, the U.S. Internal Revenue Code is over several million words long, and contains many loopholes, deductions, and exemptions which, advocates of flat taxes claim, render the collection of taxes and the enforcement of tax law complicated and inefficient.It is further argued that current tax law slows economic growth by distorting economic incentives, and by allowing, even encouraging, tax avoidance. With a flat tax, there are fewer incentives than in the current system to create tax shelters, and to engage in other forms of tax avoidance.Flat tax critics contend that a flat tax system could be created with many loopholes, or a progressive tax system without loopholes, and that a progressive tax system could be as simple, or simpler, than a flat tax system. A simple progressive tax would also discourage tax avoidance.Under a pure flat tax without deductions, every tax period a company would make a single payment to the government covering the taxes on the employees and the taxes on the company profit.NEWS,weblink The Economist, The flat-tax revolution, 14 April 2005, For example, suppose that in a given year, a company called ACME earns a profit of 3 million, spends 2 million in wages, and spends 1 million on other expenses that under the tax law is taxable income to recipients, such as the receipt of stock options, bonuses, and certain executive privileges. Given a flat rate of 15%, ACME would then owe the U.S. Internal Revenue Service (IRS) (3M + 2M + 1M) × 0.15 = 900,000. This payment would, in one fell swoop, settle the tax liabilities of ACME's employees as well as the corporate taxes owed by ACME. Most employees throughout the economy would never need to interact with the IRS, as all tax owed on wages, interest, dividends, royalties, etc. would be withheld at the source. The main exceptions would be employees with incomes from personal ventures. The Economist claims that such a system would reduce the number of entities required to file returns from about 130 million individuals, households, and businesses, as at present, to a mere 8 million businesses and self-employed.NEWS,weblink The Economist, The case for flat taxes, 14 April 2005, However, this simplicity depends on the absence of deductions of any kind being allowed (or at least no variability in the deductions of different people). Furthermore, if income of differing types are segregated (e.g., pass-through, long term cap gains, regular income, etc.) then complications ensue. For example, if realized capital gains were subject to the flat tax, the law would require brokers and mutual funds to calculate the realized capital gain on all sales and redemption. If there were a gain, a tax equal to 15% of the amount of the gain would be withheld and sent to the IRS. If there were a loss, the amount would be reported to the IRS. The loss would offset gains, and then the IRS would settle up with taxpayers at the end of the period. Lacking deductions, this scheme cannot be used to implement economic and social policy indirectly by tax credits and thus, as noted above, the simplifications to the government's revenue collection apparatus might be offset by new government ministries required to administer those policies.

Revenues

Russia was considered a prime case of the success of a flat tax; the real revenues from its personal income tax rose by 25.2% in the first year after the country introduced a flat tax in 2001, followed by a 24.6% increase in the second year, and a 15.2% increase in the third year.The Flat Tax at Work in Russia: Year Three, Alvin Rabushka, Hoover Institution, 26 April 2004.The Russian example is often used as proof of the validity of this analysis, despite an International Monetary Fund study in 2006 which found that there was no sign "of Laffer-type behavioral responses generating revenue increases from the tax cut elements of these reforms" in Russia or in other countries.The "Flat Tax(es)": Principles and Evidence, Michael Keen, Yitae Kim, and Ricardo Varsano, International Monetary Fund, September 2006.In 2021, Russia ended its flat tax on personal income as it introduced a second higher tax rate.Bulgaria's entry into the EU in 2007 was marked by a spur of reforms aimed at reducing the large share of informal economic activity, estimated at 43% in 2006. Parliament approved the introduction of a 10% corporate income tax rate for 2007, to be followed by a 10% personal income tax rate the next year. The IMF was wary of this reform, arguing that the simplified tax system would lower the budget surplus and encourage a larger current account deficit. At the time of these discussions, however, the Bulgarian government did not need external financing and proceeded with its reform plans. The year 2007 brought a huge growth of revenue from corporate income tax (by 39% compared with the previous year) and surpassed the Ministry of Finance's own forecast (27% year on year). The budget surplus rose despite considerable emergency spending at the end of the year. There were several reasons for this beneficial effect: (i) the tax rate limited the incentives for tax evasion, (ii) the optimism at the beginning of the country's EU membership, (iii) and the increase in foreign direct investment, which reached an all-time annual record of €9 billion (about 11% of GDP).Flat Tax Reform in Ukraine: Lessons from Bulgaria, Simeon Djankov, CEPR.ORG, 13 December 2022.

Overall structure

Taxes other than the income tax (for example, taxes on sales and payrolls) tend to be regressive. Under such a structure, those with lower incomes tend to pay a higher proportion of their income in total taxes than the affluent do. The fraction of household income that is a return to capital (dividends, interest, royalties, profits of unincorporated businesses) is positively correlated with total household income.{{Citation needed|date=November 2007}} Hence a flat tax limited to wages would seem to leave the wealthy better off. Modifying the tax base can change the effects. A flat tax could be targeted at income (rather than wages), which could place the tax burden equally on all earners, including those who earn income primarily from returns on investment. Tax systems could utilize a flat sales tax to target all consumption, which can be modified with rebates or exemptions to remove regressive effects, such as the proposed FairTax in the United States.BOOK, Neal, Boortz, Linder, John, 2006, The FairTax Book, Paperback, Regan Books, 0-06-087549-6, The FairTax Book,

Border adjustable

A flat tax system and income taxes overall are not inherently border-adjustable; meaning the tax component embedded into products via taxes imposed on companies (including corporate taxes and payroll taxes) are not removed when exported to a foreign country (see Effect of taxes and subsidies on price). Taxation systems such as a sales tax or value added tax can remove the tax component when goods are exported and apply the tax component on imports. The domestic products could be at a disadvantage to foreign products (at home and abroad) that are border-adjustable, which would affect the global competitiveness of a country. However, it's possible that a flat tax system could be combined with tariffs and credits to act as border adjustments (the proposed Border Tax Equity Act in the United States attempts this). Implementing an income tax with a border adjustment tax credit is a violation of the World Trade Organization agreement. Tax exemptions (allowances) on low income wages, a component of most income tax systems could mitigate this issue for high labour content industries like textiles that compete Globally.In a subsequent section, various proposals for flat tax-like schemes are discussed, these differ mainly on how they approach with the following issues of deductions, defining income, and policy implementation.

Around the world

{{See also|List of countries by tax rates}}Most countries tax personal income at the national level using progressive rates, but some use a flat rate. Most countries that have or had a flat tax on personal income at the national level are former communist countries or islands.In some countries, subdivisions are allowed to tax personal income in addition to the national government. Many of these subdivisions use a flat rate, even if their national government uses progressive rates. Examples are all counties and municipalities of the Nordic countries, all prefectures and municipalities of Japan, and some subdivisions of Italy and of the United States.

Jurisdictions that use flat taxes on personal income

National or single level

The table below lists jurisdictions where personal income is taxed by only one government level, using a flat rate. It includes independent countries and other autonomous jurisdictions. The tax rate listed is the one that applies to income from work, but does not include mandatory contributions to social security. In some jurisdictions, different rates (also flat) apply to other types of income, such as from investments. {|class="wikitable sortable nowrap" style=line-height:1.2!Jurisdiction !! Tax rate

Abkhazia}}HTTPS://MNS-RA.ORG/UPLOAD/IBLOCK/132/132641EA0CEFC65E7E62D2FE8CAE3B8E.PDF >TITLE=Закон Республики Абхазия о подоходном налоге с физических лиц и индивидуальных предпринимателей	PUBLISHER=MINISTRY OF TAXES AND FEES OF ABKHAZIA	| 10%

Armenia}}Armenia – Individual – Taxes on personal income, PricewaterhouseCoopers.	20%

Belize}}File Your Personal Income Tax Form, Income Tax Department of Belize.	25%

Bolivia}}HTTPS://WWW.EY.COM/EN_GL/TAX-GUIDES/WORLDWIDE-PERSONAL-TAX-AND-IMMIGRATION-GUIDE >TITLE=WORLDWIDE PERSONAL TAX AND IMMIGRATION GUIDE	ERNST & YOUNG, >| 13%

Bosnia and Herzegovina}}Bosnia and Herzegovina – Individual – Taxes on personal income, PricewaterhouseCoopers.	10%{{efn|The national government does not tax income, but all three subdivisions (Federation of Bosnia and Herzegovina, Republika Srpska and Brčko District) tax income using the same flat rate.}}

Bulgaria}}	10%

East Timor}}Timor-Leste – Individual – Taxes on personal income, PricewaterhouseCoopers.	10%

Estonia}}	20%

Georgia}}	20%

Guernsey}}	20%{{efn	Alderney. Sark does not tax income, but taxes assets at a flat rate with minimum and maximum amounts.HTTPS://WWW.GUERNSEYLEGALRESOURCES.GG/ORDINANCES/SARK/T/TAXATION/DIRECT-TAXES-FOR-2024-SARK-ORDINANCE-2023/	PUBLISHER=GUERNSEY LEGAL RESOURCES, }}

Hungary}}	15%

Jersey}}	20%

Kazakhstan}}	10%

Kurdistan}}	5%{{efn|The autonomous region of Kurdistan taxes personal income at a flat rate instead of the progressive rates set by the federal government of Iraq.}}

Kyrgyzstan}}Kyrgyzstan – Individual – Taxes on personal income, PricewaterhouseCoopers.	10%

Moldova}}	12%

Nauru}}HTTP://RONLAW.GOV.NR/NAURU_LPMS/INDEX.PHP/ACT/VIEW/1586 >TITLE=EMPLOYMENT AND SERVICES TAX ACT 2014	| 20%

North Macedonia}}HTTPS://TAXSUMMARIES.PWC.COM/NORTH-MACEDONIA/INDIVIDUAL/TAXES-ON-PERSONAL-INCOME >TITLE=NORTH MACEDONIA – INDIVIDUAL – TAXES ON PERSONAL INCOME	| 10%

Romania}}	10%

South Ossetia}}HTTP://WWW.NALOG-RSO.RU/ZAKON/ZAKON9.PHP >TITLE=LAW ON THE INCOME TAX ON INDIVIDUALS	LANGUAGE=RU	ARCHIVE-DATE=5 NOVEMBER 2013	| 12%

Tajikistan}}Tajikistan – Individual – Taxes on personal income, PricewaterhouseCoopers.	12%

Transnistria}}HTTPS://WWW.VSPMR.ORG/LEGISLATION/LAWS/ZAKONODATELJNIE-AKTI-PRIDNESTROVSKOY-MOLDAVSKOY-RESPUBLIKI-V-SFERE-BYUDJETNOGO-FINANSOVOGO-EKONOMICHESKOGO-NALOGOVOGO-ZAKONODATELJSTVA/ZAKON-PRIDNESTROVSKOY-MOLDAVSKOY-RESPUBLIKI-O-PODOHODNOM-NALOGE-S-FIZICHESKIH-LITS.HTML >TITLE=Закон Приднестровской Молдавской Республики о подоходном налоге с физических лиц	PUBLISHER=SUPREME COUNCIL OF THE PRIDNESTROVIAN MOLDAVIAN REPUBLIC	| 15%

Turkmenistan}}Turkmenistan – Individual – Taxes on personal income, PricewaterhouseCoopers.	10%

Ukraine}}	19.5%{{efn|Composed of a regular tax rate of 18% and a military tax of 1.5%.}}

Uzbekistan}}	12%

Subnational jurisdictions

The table below lists jurisdictions where personal income is taxed by multiple government levels, and at least one level uses a flat rate. The tax rates listed are those that apply to income from work, except as otherwise noted. Where a range of rates is listed, it means that the flat rate varies by location, not progressive rates.{|class="wikitable sortable nowrap" style="font-size:90%; line-height:1.2"!Country orterritory !! Nationaltax rate !! Subnationaljurisdictions !! Subnationaltax rate !! Subnationaljurisdictions !! Subnationaltax rate

Denmark}}Local government personal taxation by time, region and tax rate, Statistics Denmark.	{{n/a		municipalities of Denmark>all municipalities{{efn	Ertholmene, which is not part of a municipality, there is no municipal tax.Residents of Danish island cannot vote, DR, 21 November 2017 {{in lang>da}}.}}	23.36 to 26.3%{{efn	Plus church tax for members of certain religions, also at a flat rate.}}	{{n/a}}	{{n/a}}

Faroe Islands}}HTTPS://WWW.TAKS.FO/FO/BORGARI/GJOLD-OG-AGODAR/TALVA-YVIR-KOMMUNUSKATT-KIRKJUSKATT-OG-BARNAFRADRATT/ >TITLE=TALVA YVIR KOMMUNUSKATT, KIRKJUSKATT OG BARNAFRáDRáTT 2024	PUBLISHER=TAKS		progressive}}	municipalities of the Faroe Islands	>	name=church}}	{{n/a}}	{{n/a}}

{{flag

TRANS-TITLE=MUNICIPAL AND CHURCH INCOME TAX RATES IN YEAR 2024

DATE=22 NOVEMBER 2023

Welfare services are financed by the national government in mainland Finland and by the municipalities in Ã…land. Accordingly, in Ã…land the national tax rates are reduced by 12.64percentage point

,HTTPS://WWW.FINLEX.FI/SV/LAKI/AJANTASA/1992/19921535

TRANS-TITLE=INCOME TAX LAW, PARAGRAPH 124

LANGUAGE=SV, and the municipal tax rates are higher than in mainland Finland. For comparison with mainland Finland, if this reduction applied to the municipal tax rates in Ã…land, they would be 3.86 to 7.06%.}}

rowspan=2 {{n/a

mainland Finland>mainland municipalities of Finland

>

name=church}}

{{n/a}}

{{n/a}}

Ã…land municipalities of Ã…land>municipalities	16.5 to 19.7%{{efn		| {{n/a}}

{{flag	Greenland – Individual – Taxes on personal income, PricewaterhouseCoopers. >	10%	Administrative divisions of Greenland	>		Collected by the national government and distributed to the municipalities.}}	6%

Set by the national government for the area.}}	26%	{{n/a}}	{{n/a}}

Iceland}}Municipal tax, Icelandic Association of Local Authorities {{in lang		progressive}}	municipalities of Iceland	>		| {{n/a}}

{{flag	Regional additional to the personal income tax, Department of Finance of Italy {{in lang>it}}.Municipal additional to the personal income tax, Department of Finance of Italy {{in lang	Most municipalities tax income, most using a flat rate but some use progressive rates.}}	rowspan=8 {{n/a		Abruzzo}}	1.73%	List of municipalities of Abruzzo	>| 0.1 to 0.8%

Aosta Valley}}	1.23%	List of municipalities of the Aosta Valley	>| 0.15 to 0.5%

Basilicata}}	1.23%	List of municipalities of Basilicata	>| 0.1 to 0.8%

Calabria}}	1.73%	List of municipalities of Calabria	>| 0.2 to 1.2%

Sardinia}}	1.23%	List of municipalities of Sardinia	>| 0.1 to 0.8%

Sicily}}	1.23%	List of municipalities of Sicily	>| 0.2 to 0.938%

Veneto}}	1.23%	List of municipalities of Veneto	>| 0.2 to 0.8%

regions of Italy>other regions	{{n/a		comune>most municipalities	0.08 to 1.2%

Japan}}Overview of individual tax system, Japan External Trade Organization.	{{n/a		prefectures of Japan>all prefectures	4%	municipalities of Japan	>| 6%

Norway}}HTTPS://WWW.SKATTEETATEN.NO/EN/RETTSKILDER/TYPE/SKATTEDIREKTORATETS-MELDINGER/FORSKUDDSMELDINGEN-2024 >TITLE=FORSKUDDSMELDINGEN 2024	PUBLISHER=NORWEGIAN TAX ADMINISTRATION	LANGUAGE=NO, {{efn	Svalbard.Jan Mayen and the Norwegian dependencies in Antarctica, Norwegian Tax Administration {{in lang>no}}.}}	{{n/a		counties of Norway>all counties	2.35%	List of municipalities of Norway	>| 10.95%

{{flag		PUBLISHER=STATISTICS SWEDEN	Although every government level uses a flat tax rate, the national tax has a much higher exemption, so the combined tax by all levels is progressive.The combined county and municipal tax rate ranges from 28.98 to 35.3%. In Gotland, the only municipality handles county and municipal functions, so the county does not tax income and the municipality uses a tax rate similar to the combined county and municipal rate in other municipalities.}}	rowspan=2		Gotland}} Gotland County	{{n/a}}	Gotland Municipality	33.6%

counties of Sweden>other counties	10.83 to 12.38%	municipalities of Sweden	>| 16.6 to 23.8%

{{flag	All other cantons of Switzerland	and municipalities use progressive rates.Switzerland Highlights 2023, Deloitte, January 2023.}} >	progressive}}	{{flag		TRANS-TITLE=TAX BASES 2001–2024	DATE=7 DECEMBER 2023			Obwalden>all municipalities	6.948 to 9.45%{{efn|name=church}}

Uri}}HTTPS://WWW.UR.CH/DIENSTLEISTUNGEN/3196 >TITLE=NATüRLICHE PERSONEN – STEUERSäTZE UND TARIFE 2012–2024	PUBLISHER=CANTON OF URI			Municipalities of the canton of Uri>all municipalities	6.39 to 8.52%{{efn|name=church}}

United Kingdom}}{{efn	England and Northern Ireland without modifications. They are reduced in Wales, whose government adds a flat rate.Welsh Rates of Income Tax, Welsh Government, 9 March 2022. Scotland replaces the national rates with its own progressive rates.Income Tax in Scotland, Gov.uk.}} >	progressive}}	{{flag			| {{n/a}}

{{flag	All other states, counties and municipalities either use progressive rates or do not tax income.}}	rowspan=28 {{n/a		{{flag	Most counties and most municipalities in this state do not tax income,Alabama, TimeTrex. and all those that do use a flat rate. Where a county or municipal tax exists, the combined rate ranges from 0.5 to 4% depending on the location.}}	rowspan=2 {{n/a		Macon County, Alabama>Macon CountyOccupational Tax Return, Avenu.	1%

List of cities and towns in Alabama>some municipalitiesOccupational tax reporting, City of Tuskegee.	0.5 to 3%

Arizona}}HTTPS://AZDOR.GOV/BUSINESS/WITHHOLDING-TAX/WITHHOLDING-FAQS >TITLE=WITHHOLDING FAQS			| {{n/a}}

Colorado}}Individual Income Tax Guide, Colorado Department of Revenue.	4.4%	{{n/a}}	{{n/a}}

Delaware}}{{efn	Most municipalities in this state do not tax income. All those that do use a flat rate.}}	{{n/a		Wilmington, Delaware>WilmingtonEarned income tax regulations, City of Wilmington.	1.25%

Georgia (U.S. state)		PUBLISHER=GEORGIA GENERAL ASSEMBLY,	5.49%	{{n/a}}	{{n/a}}

Idaho}}HTTPS://TAX.IDAHO.GOV/TAXES/INCOME-TAX/INDIVIDUAL-INCOME/ONLINE-GUIDE/ >TITLE=INDIVIDUAL INCOME TAX BASICS			| {{n/a}}

Illinois}}Income Tax Rates, Illinois Department of Revenue.	4.95%	{{n/a}}	{{n/a}}

Indiana}}How to compute withholding for state and county income tax, Department of Revenue of Indiana.	3.05%	List of counties in Indiana	>| 0.5 to 3%

{{flag	No counties or municipalities in this state tax income from work, but some tax interest and dividends, all using a flat rate. Where a county or municipal tax exists, the combined rate ranges from 0.5 to 3% depending on the location.HTTPS://WWW.KSREVENUE.GOV/PDF/20024.PDF >TITLE=LOCAL INTANGIBLES TAX RETURN 2024		progressive}}	List of counties in Kansas	>	name=interest|Only applies to interest and dividends. This jurisdiction does not tax income from work.}}

Lists of places in Kansas>some municipalities	0.125 to 2.25%{{efn|name=interest}}

{{flag		PUBLISHER=KENTUCKY DEPARTMENT OF REVENUE	Most counties, some municipalities and some school districts in this state tax income, most using a flat rate but some using regressive rates. Where a county, municipal or school district tax exists, the combined rate ranges from 0.45 to 3.75% depending on the location.Occupational Taxes, Kentucky Secretary of State.}}	rowspan=3		List of counties in Kentucky>most counties	0.45 to 2.25%

List of cities in Kentucky>some municipalities	0.5 to 2.5%

List of school districts in Kentucky>some school districts	0.5 to 0.75%

Maryland}}{{efn	name=baltimore}} Most use a flat rate, but some use progressive rates.}}	{{n/a		List of counties in Maryland>most countiesTax Rates, Comptroller of Maryland.{{efn	Including the city of Baltimore, which is equivalent to a county.}}	2.25 to 3.2%

Michigan}}Withholding Tax Information by Calendar Year, Michigan Department of Treasury.{{efn			List of municipalities in Michigan>some municipalitiesWhat cities impose an income tax?, Michigan Department of Treasury.	1 to 2.4%

Mississippi}}House Bill 531, Mississippi Legislature, 2022.	4.7%	{{n/a}}	{{n/a}}

{{flag	name=most}}	rowspan=2 {{n/a		Kansas City, Missouri>Kansas CityHave you paid your KCMO earnings tax?, Kansas City, Missouri.	1%

St. Louis>Saint LouisEarnings Tax Department, City of Saint Louis.	1%

New Hampshire}}Overview of New Hampshire taxes, Department of Revenue Administration of New Hampshire.	3%{{efn		| {{n/a}}

North Carolina}}Tax Rate Schedules, North Carolina Department of Revenue.	4.5%	{{n/a}}	{{n/a}}

{{flag	Most municipalities and some school districts in this state tax income, all using a flat rate. Where a municipal or school district tax exists, the combined rate ranges from 0.25 to 4.5% depending on the location.Municipal Income Tax Rate Database, Department of Taxation of Ohio.School District Income Tax Rate Database, Department of Taxation of Ohio.}}	rowspan=2 {{n/a		Administrative divisions of Ohio>most municipalities	0.5 to 3%

List of school districts in Ohio>some school districts	0.25 to 2%

Oregon}}{{efn		progressive}}	Metro (Oregon regional government)	Personal Income Tax Filing and Payment Information, City of Portland, Oregon. >| 1%

{{flag	Personal income tax, Pennsylvania Department of Revenue.{{efn>Most municipalities and most school districts in this state tax income, all using a flat rate. Where a municipal or school district tax exists, the combined rate ranges from 0.312 to 3.75% depending on the location.EIT / PIT / LST Tax Registers, Pennsylvania Department of Community and Economic Development.}}	rowspan=2		List of municipalities in Pennsylvania>most municipalities	0.312 to 3.75%

List of school districts in Pennsylvania>most school districts	0.5 to 2.05%

Utah}}Tax rates, Utah State Tax Commission.	4.65%	{{n/a}}	{{n/a}}

Washington}}Capital gains tax, Washington State Department of Revenue.	7%{{efn		| {{n/a}}

Jurisdictions without permanent population

Despite not having a permanent population, some jurisdictions tax the local income of temporary workers, using a flat rate.{|class="wikitable sortable nowrap" style=line-height:1.2!Jurisdiction !! Tax rate

British Antarctic Territory}}Frequently Asked Questions about BAT Tax, British Antarctic Survey, September 2014.	7%

French Southern and Antarctic Lands}}Practical guide of the winter sojourner in the French Southern Lands, French Southern and Antarctic Lands, September 2019 {{in lang		6.3% for residents of Réunion.}}

South Georgia and the South Sandwich Islands}}HTTPS://LAWS.GOV.GS/WP-CONTENT/UPLOADS/2022/07/20170130-GUIDANCE-TO-INCOME-TAX.PDF >TITLE=GUIDE TO THE INCOME TAX ORDINANCE	| 7%

Jurisdictions reputed to have a flat tax

• {{flag|Anguilla}} does not have a general income tax,Anguilla Highlights 2023, Deloitte, January 2023. but since 2011 it imposes an "interim stabilisation levy" on salaries, composed of a portion paid by the employer and another paid by the employee through withholding. Each portion has a flat rate of 3%.Interim Stabilisation Levy {{Webarchive|url=https://web.archive.org/web/20181109112652weblink |date=9 November 2018 }}, Inland Revenue Department of Anguilla. This tax is in addition to a mandatory contribution to social security.Social Security Contributions, Anguilla Social Security Board.
• {{flag|Azerbaijan}} imposes progressive tax rates of 14% and 25% on income from employment in the oil and gas and public sectors, but a flat tax rate of 14% on income from employment in other sectors and on investment income. It also imposes a flat tax rate of 20% on business income.
• {{flag|British Virgin Islands|name=The British Virgin Islands}} do not have a general income tax,British Virgin Islands Highlights 2023, Deloitte, January 2023. but impose a payroll tax on salaries, composed of a portion paid by the employer and another paid by the employee through withholding. The employee portion has a flat rate of 8%.Payroll Tax, Government of the British Virgin Islands. This tax is in addition to mandatory contributions to social security and national health insurance.Contributions, British Virgin Islands Social Security Board.National Health Insurance, British Virgin Islands National Health Insurance.
• {{flag|Hong Kong}}: Some sources claim that Hong Kong has a flat tax,Fixing a Broken Tax System with a Flat Tax, Daniel J. Mitchell, Capitalism Magazine, 23 April 2004. though its salary tax structure has several different rates ranging from 2% to 17% after deductions.Tax Rates of Salaries Tax & Personal Assessment, Government of Hong Kong, April 2022. Taxes are capped at 15% of gross income, so this rate is applied to upper income returns if taxes would exceed 15% of gross otherwise. Accordingly, Duncan Black of the progressive media-monitoring group Media Matters for America says "Hong Kong's 'flat tax' is better described as an 'alternative maximum tax.'" Fund wrong on Hong Kong "flat tax", Duncan Black, Media Matters for America, 28 February 2005. Alan Reynolds of the right-libertarian think tank Cato Institute similarly notes that Hong Kong's "tax on salaries is not flat but steeply progressive."Hong Kong's Excellent Taxes, Alan Reynolds, Cato Institute, 2 June 2005.
• {{flag|Saudi Arabia}} does not have a general income tax, but it imposes zakat (wealth tax) on the business assets of residents who are nationals of GCC countries, and income tax on the business income of residents who are not nationals of GCC countries and of nonresidents. Zakat has a flat rate of 2.5%, and income tax has a flat rate of 20%.
• {{flag|United Arab Emirates|name=The United Arab Emirates}} do not have a general income tax, but tax business income exceeding a threshold at a flat rate of 9%.WEB,weblink United Arab Emirates – Individual – Taxes on personal income, PricewaterhouseCoopers,

Jurisdictions that had a flat tax

• {{flag|Albania}} introduced a flat tax of 10% on personal income in 2008, and replaced it with two rates of 13% and 23% in 2014.The Flat Tax at Work in Albania: Year One, Alvin Rabushka, 21 January 2009.Albania Abandons Its Flat Tax, Alvin Rabushka, 29 December 2013.
• {{flag|Artsakh}} introduced a flat tax of 21% on personal income in 2014, reduced to 20% in 2019, 15% in 2021, 14% in 2022, and 13% in 2023.On income tax, National Assembly of Artsakh, 28 December 2013 {{in lang|hy}}.On making changes and additions to the law of the Republic of Nagorno-Karabakh "On income tax", National Assembly of Artsakh, 1 July 2019 {{in lang|hy}}.On making changes and additions to the law "On income tax", National Assembly of Artsakh, 19 February 2021 {{in lang|hy}}. In 2024, the country was dissolved and reintegrated into Azerbaijan.
• {{flag|Belarus}} introduced a flat tax of 12% on personal income in 2009,WEB,weblink Belarus: Flat Taxation System Introduced, Library of Congress, 30 July 2009, increased to 13% in 2015.WEB,weblink Подоходный налог-2015: увеличены размеры ставки налога и налоговых вычетов, Income tax 2015: tax rates and tax deductions increased, Валентин Жуков, Главный Бухгалтер, 3 January 2015, ru, It introduced a second higher rate of 25% in 2024.WEB,weblink Введена прогрессивная система налогообложения: опубликованы важные изменения в Налоговый кодекс на 2024 год, A progressive taxation system has been introduced: important changes to the Tax Code for 2024 have been published, Экономическая Газета, 30 December 2023, ru,
• {{flag|Czech Republic}} introduced a flat tax of 15% on personal income in 2008. However, this tax also applied to employer contributions to social security and health insurance, for an effective tax rate of about 20% on income from work up to the contribution limit.Taxes in 2009 will fall only slightly, we will not improve, Podnikatel.cz, 30 October 2008 {{in lang|cs}}. In 2013, a tax of 7% was added to income from work above the contribution limit, for an effective second rate of 22%.Czech Republic - Income Tax {{Webarchive|url=https://web.archive.org/web/20210426155417weblink |date=26 April 2021 }}, KPMG, 31 January 2020. In 2021, the tax rates became 15 and 23%, both applying to all types of income and no longer to employer contributions.Supergross wage, Měšec.cz {{in lang|cs}}.Czech Republic – What’s New for Employers and Employees in 2021?, KPMG, 22 January 2021.
• {{flag|Grenada}} had a flat tax of 30% on personal income until 2014, when it introduced a second lower rate of 15%.Income Tax (Amendment) Order, 2014, Grenada Inland Revenue Division.
• {{flag|Guyana}} had a flat tax of 30% on personal income until 2017, when it replaced it with progressive rates of 28% and 40%.Income Tax (Amendment) Act 2017, Parliament of Guyana.
• {{flag|Iceland}} introduced a national flat tax on personal income in 2007, at a rate of 22.75%. With the additional municipal tax, which was already flat, the total tax rate was up to 36%.Iceland Comes in From the Cold With Flat Tax Revolution, The Business, 21 March 2007. In 2010, Iceland replaced its national flat tax with progressive rates of 24.1% to 33%. With the additional municipal tax, which remained flat, the top rate became 46.28%.Iceland abandons the flat tax, Alvin Rabushka, 16 March 2010.
• {{flag|Jamaica}} had a flat tax of 25% on personal income until 2010, when it introduced additional higher rates of 27.5% and 33%. It restored the flat tax of 25% in 2011, and introduced a second higher rate of 30% in 2016.Income tax rates, thresholds and exemptions 2003-2018, Tax Administration Jamaica.
• {{flag|Latvia}} introduced a flat tax of 25% on personal income in 1997.Flat tax reforms, 4Liberty.eu, 6 March 2013. The rate was changed to 23% in 2009, 26% in 2010, 25% in 2011, 24% in 2013, and 23% in 2015.Janis Grasis and Juris Bojārs, "Necessity of the introduction of the progressive income tax system: A case of Latvia", Economics, Social Sciences and Information Management, March 2015. In 2018, Latvia replaced its flat tax with progressive rates of 20%, 23% and 31.4%.WEB,weblink Latvian parliament adopts tax reform, Tax-News, 3 August 2017,weblink 16 February 2018,
• {{flag|Lithuania}} introduced a flat tax of 33% on personal income in 1995. The rate was changed to 27% in 2006, 24% in 2008, and 15% in 2009. In 2019, Lithuania replaced its flat tax with progressive rates of 20% and 27%.OECD tax database explanatory annex, OECD, April 2019.
• {{flag|Madagascar}} had a flat tax of 20% on personal income until 2021, when it introduced additional lower rates of 5, 10 and 15%.Madagascar: Tax – A new calculation mode of income tax, AllAfrica, 10 February 2021 {{in lang|fr}}.
• {{flag|Mauritius}} introduced a flat tax rate of 15% on personal income in 2009.WEB,weblink Flat and Flatter Taxes Continue to Spread Around the Globe, Alvin Rabushka, Hoover Institution, 16 January 2007,weblink" title="web.archive.org/web/20070707094006weblink">weblink 7 July 2007, In 2017, it introduced an additional "solidarity levy" of 5% on high income, for a combined top rate of 20%.WEB,weblink Income Tax – Pay As You Earn (PAYE), Mauritius Revenue Authority, 1 August 2017,weblink" title="web.archive.org/web/20171215102700weblink">weblink 15 December 2017, In 2018, it introduced an additional lower rate of 10%.WEB,weblink Income Tax – Pay As You Earn (PAYE), Mauritius Revenue Authority, 3 August 2018,weblink" title="web.archive.org/web/20181024153110weblink">weblink 24 October 2018,
• {{flag|Mongolia}} had a flat tax of 10% on personal income until 2023, when it introduced additional higher rates of 15 and 20%.Changes in tax and other legislations for the 2023 year, KPMG, January 2023.
• {{flag|Montenegro}} introduced a flat tax of 15% on personal income in 2007, reduced to 12% in 2009 and 9% in 2010. It introduced a second higher rate of 15% in 2013, reduced to 13% in 2015, 11% in 2016, and eliminated in 2020, thus returning to a flat tax of 9%.2021 review on Montenegro, Regional Cooperation Council. It reintroduced a second higher rate of 15% in 2022.Montenegro: Amendments to individual income tax and labor laws effective 1 January 2022, KPMG, 19 January 2022.
• {{flag|Russia}} introduced a flat tax of 13% on personal income in 2001, and a second higher rate of 15% in 2021.The Russian Flat Tax Reform, International Monetary Fund, January 2005.Russian Federation: Russia raises individual income tax for high earners to 15% as of 2021, Lexology, 1 December 2020.
• {{flag|Saint Helena}} introduced a flat tax of 25% on personal income in 2012, and replaced it with two rates of 26% and 31% in 2015.St. Helena Adopts a 25% Flat Tax, Alvin Rabushka, 3 November 2013.WEB,weblink Income Tax Ordinance, Government of Saint Helena,weblink" title="web.archive.org/web/20160919181148weblink">weblink 19 September 2016,
• {{flag|Seychelles}} had a flat tax of 15% on personal income until 2018, when it introduced additional higher rates of 20% and 30%.Seychelles introduces new progressive individual income tax from June 2018, Orbitax.
• {{flag|Slovakia}} introduced a flat tax of 19% on personal income in 2004, and a second higher rate of 25% in 2013.Flat tax roundup December 2012, Alvin Rabushka, 29 December 2012.
• {{flag|Trinidad and Tobago}} had a flat tax of 25% on personal income until 2017, when it introduced a second higher rate of 30%.Trinidad & Tobago's recent tax changes and regulations, Oxford Business Group.
• {{flag|Tuvalu}} had a flat tax of 30% on personal income until 2009, when it introduced a second lower rate of 15%.Income Tax Act, 2008 revised edition, Tuvalu Legislation.Income Tax (Amendment) Act 2008, Tuvalu Legislation.

Subnational jurisdictions

• {{flag|Alberta}} introduced a flat tax of 10% on personal income in 2001, and additional higher rates of 12, 13, 14 and 15% in 2016.The winners and losers if Alberta returns to a flat tax system, Maclean's, 9 May 2018. This flat tax was in addition to the progressive rates imposed by the federal government of Canada.
• {{flag|Massachusetts}} introduced a flat tax of on personal income in 1917. The general rate was initially 1.5% and was changed many times, reaching a maximum of 6.25% in 1990 and 5% in 2020. Different flat rates applied to some types of investment income.Ballot Question One: Fair Share Amendment or Unfair Tax Hike?, Marblehead Beacon, 3 October 2022. In 2023, the state introduced a surtax of 4% on higher income, thus ending its flat tax system.State Tax Changes Taking Effect January 1, 2023, Tax Foundation, 22 December 2022. During its existence, this flat tax was in addition to the progressive rates imposed by the federal government of the United States.
• {{flag|Tennessee}} introduced a flat tax on interest and dividends in 1929, at a rate of 5%. The rate was changed to 6% in 1937, 5% in 2016, 4% in 2017, 3% in 2018, 2% in 2019, 1% in 2020, and the tax was repealed in 2021.Hall Income Tax Distributions and Local Government Finances, Tennessee Advisory Commission on Intergovernmental Relations, April 2004.Hall Income Tax Notice, Tennessee Department of Revenue, May 2017. This flat tax was in addition to the progressive rates imposed by the federal government of the United States.

See also

• Consumption tax
• Excess burden of taxation (or more broadly deadweight loss)
• FairTax
• Fiscal drag (also known as Bracket creep)
• Georgism
• Income tax
• Kemp Commission
• Land value tax
• Negative income tax
• Optimal tax
• Progressive tax
• Regressive tax
• Sales tax
• Single tax
• Taxable income elasticity (also known as Laffer Curve)
• Value added tax
• 9–9–9 Plan

Notes

{{notelist}}

References

{{Reflist|30em}}

• Steve Forbes, 2005. Flat Tax Revolution. Washington: Regnery Publishing. {{ISBN|0-89526-040-9}}
• Robert Hall and Alvin Rabushka, 1995 (1985). weblink" title="web.archive.org/web/20050224084602weblink">The Flat Tax. Hoover Institution Press.
• Richard Parncutt, 2006–2010. Free enterprise without poverty: Effectively progressive income tax.weblink" title="https:/-/web.archive.org/web/20110514152858weblink">weblink.
• Anthony J. Evans, "weblink" title="web.archive.org/web/20070808181054weblink">Ideas and Interests: The Flat Tax" Open Republic 1(1), 2005

External links

• The Laffer Curve: Past, Present and Future: A detailed examination of the theory behind the Laffer curve, and many case studies of tax cuts on government revenue in the United States
• Podcast of Rabushka discussing the flat tax: Alvin Rabushka discusses the flat tax with Russ Roberts on EconTalk.
• weblink" title="web.archive.org/web/20101008222858weblink">Podcast of Rabushka discussing the flat tax: Alvin Rabushka discusses the flat tax on PoliTalk.
• The Flat Tax: How it Works and Why it is Good for America

{{Authority control}}