Flat Taxes Can be Progressive

July 8, 2021

David H. Nelson

I read an interesting viewpoint on flat taxes that was new to me: they can be rather progressive.

The reason is the standard deduction. Assume a deduction of $50,000 and a flat tax rate of 20$. Everyone with that income or less has no taxable income so pays $0 -- an effective tax rate of 0% A person with an income of $100,000 pays 20% on $50k of taxable income -- $10,000 -- an effective tax rate of 10% and someone with a gross income of 250,000 has $200k of taxable income and pays $20,000, an effective tax rate of 20%.

Whenever I read about flat taxes I never considered how a standard deduction produces a progressive tax schedule.

Certainly more simple and should bear consideration.

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