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The Flat Tax: What Degree of Simplification Does It Imply?

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  • Luigi Bernardi

    (Università di Pavia)

Abstract

According to its creators, the principal purpose of the original Flat Tax (FT: HALL AND RABUSHKA, 1985-1995) was to simplify the graduated PIT. This claim was broadly accepted, and the debate has since focused on other aspects of the proposal (single rate, redistribution effects, the tax treatment of corporations, and so on). The aim of this paper is therefore simply to analyse the simplification effects of the Flat Tax (FT). We shall be examining the criticisms made by the FT’s supporters in regard to the complications of a standard graduated PIT, the alleged simplifications ascribed to the introduction of the FT, and the robustness of such claims. We conclude that several reservations may be raised with regard to the claimed simplification that would result from the introduction of a FT. Such reservations, together with other weaknesses of the FT, may help explain why to date its diffusion has been limited to a small, specific group of countries (mainly former communist countries in Eastern Europe).

Suggested Citation

  • Luigi Bernardi, 2019. "The Flat Tax: What Degree of Simplification Does It Imply?," Working papers 79, Società Italiana di Economia Pubblica.
    • Handle: RePEc:ipu:wpaper:79
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    More about this item

    Keywords

    Personal Income Tax; Flat Tax; simplification;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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