For the last fifty years an intense debate regarding the income tax system has ensued between the two main political parties in the United States, this system is called the flat tax. A flat tax is a fair tax system that applies a standard income tax rate to all individuals that pay income taxes. Usually, a system that utilizes a flat tax system allows no deductions. One economic theory states that such system encourages growth and gives payees an incentive to earn higher incomes with penalizing them with a higher tax bracket.
The current progressive tax system is bulky, complex and hard to understand for many individuals. Tax breaks and incentives undermine revenue collection by not equally distributing the tax burden across all incomes. In January of 2013, Senator Richard Shelby from the state of Alabama proposed a flat tax system named the Simplified, Manageable And Responsible Tax or SMART for short, this would establish a 17% tax for individuals and business for everyone. Included in his plan is allowances that would mirror the consumer price index, this is done to protect American taxpayers inflation. To allow income to be taxed only once, earnings from pre-taxed income (such as interest from savings) would be tax exempt, the end result of such a system is a decreased tax liability from everyone while increasing tax revenue. While some countries such as Latvia, Estonia, Slovakia and Hong Kong have experienced growth with the flat tax some economists argue that America’s sophisticated economy can’t handle a flat tax.
Opponents of the flat tax highlight some startling facts such as only half of Americans actually pay income taxes. Next, the calculated revenue form the flat tax would be too small to support the current government and increase current budget deficits. Their solution his keep the current system and add a more progressive tax structure.
However, both parties agree that a change to the current system is needed,...