Flat tax

A tax which is levied at the same rate on all levels of income. See also progressive tax.

Flat Tax

A way to structure an income tax where everyone (or nearly everyone) pays the same marginal rate. For example, a flat tax may be set at 15%, and everyone will pay that rate regardless of how much they earn. This contrasts with progressive taxation, where the marginal tax rate increases with increased income. Proponents of a flat tax argue that it provides an incentive for people to earn more (because they keep more of what they earn than under a progressive tax system), which in turn spurs economic growth. Opponents contend that a flat tax deprives the government of revenue and progressive taxation does not disincentivize earning more because, even at higher rates, people keep more after taxes than they would have done if they earned less.

flat tax

An income tax that has a single rate of taxation. For example, a taxing authority may levy a flat tax of 3% against gross income. See also graduated flat tax.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

Flat tax.

A flat tax, also known as a regressive tax, applies to everyone at the same rate, as a sales tax does.

Advocates of a flat income tax for the United States say it's simpler and does away with the kinds of tax breaks that tend to favor the wealthy. Opponents say that middle-income taxpayers would carry too large a proportion of the total tax bill.