FairTax, flat tax, income tax comparison chart (pdf file)
Compares these three taxes on the basic tax reform criteria

A nonpartisan/neutral definition sheet for the various tax proposals vying to replace the current income and/or Social Security tax systems (pdf file)
Only four things can be taxed: Earnings (wages and salaries), income from investments, wealth (property, stocks, etc.), and consumption. The national retail sales tax, the flat income tax, and the value-added tax are different approaches to taxing consumption.

The FairTax (real reform) vs. the flat tax: A comparison (pdf file)
The U.S.A. once had a flat tax with its first income tax in 1913. With five simple changes, the flat tax can be converted into a graduated income tax, steps that should be all too familiar with any student of the 20th century.

What about the flat tax? Would it be better and easier to pass?
The flat tax and the FairTax share some important similarities. They are both flat-rate taxes that are neutral with respect to savings and investment. The flat tax, however, retains the invasive income tax administration apparatus and can easily revert to a graduated, convoluted mess, as it has many times over many years.

Very few people really understand the flat tax. Its authors will tell you it is a consumption tax that uses the income tax system for implementation. Only an academic or government bureaucrat would dream up a consumption tax that needs the invasive income tax apparatus for its application, when one can simply have a retail sales tax and reduce the bureaucracy by 90 percent or more! In addition, a large part of the burden of the flat tax the business tax will remain hidden from people in the retail price of goods and services.

In contrast, the FairTax is simple, easy to understand, and visible. It cannot be converted into an income tax.
Under a flat tax, individuals would still file an income tax return each year similar to today’s 1040 EZ. While this is a simple postcard, the record keeping required to fill in the blanks is still long and burdensome. Under the FairTax, individuals never file a tax return again, ever! Under the flat tax, the payroll tax would be retained and income tax withholding would still be with us. Under the FairTax, the payroll tax, which is a larger and more regressive tax burden for most Americans than is the income tax, is repealed. Under the FairTax, what you earn is what you keep. No more withholding taxes; no more income tax.

Notwithstanding flat tax proponents’ honorable intentions, income tax reform has been less than a success in the past. Congress has tried to reform the income tax again and again, with the result being greater complexity and, generally, higher rates. The problem is the income tax, and it is time to stop tinkering with it.

Flat tax supporters have made major political attempts to pass their reform, including the efforts of former Majority Leader Dick Armey and presidential candidate Steve Forbes, and yet their efforts have not progressed politically for several years. With every debate, the flat tax loses grassroots and congressional support to the FairTax. It is time to junk the entire income tax system and start over with a tax system that is more appropriate for a free society and better able to meet the needs of the information age.


No such thing as "The Flat Tax"
By Phil Hinson, AFFT Southeastern Director

There are flat tax proposals in the house and senate (and some such as the well known Hall-Rubishka version, which isn't even a bill in congress). It is illogical and inappropriate to debate a fully fleshed out serious proposal
(FairTax) with a form of taxation (flat tax). One can debate one form of taxation against another (sales taxes vs. flat income taxes), but that is of limited usefulness. One could also debate the FairTax against one of the
specific flat tax proposals, such as the Burgess flat tax bill in the house, which I believe is the only flat tax proposal with a bill in the house, which is where tax reform bills are supposed to originate.

The Burgess bill is a flat tax option proposal. Steve Forbes is also now championing this approach. Taxpayers would be given a one time election to opt out of the current system and use the flat tax calculation for the rest
of their lives. Adding a flat tax option to the current system means two things.

1. Since almost all taxpayers who elect the flat tax option can be expected to do so because they anticipate tax savings, there is no way that it can be revenue neutral, which means it will never be seriously debated in congress,

2. Since the entire set of tax regs would have to be maintained for those not electing the new flat tax option, not one line of the current 66,000 plus page system would be eliminated. In fact, the size of the tax system
would expand to cover the new flat tax option.

Those are the problems associated with adopting a flat tax as an appendage to the current system. Perhaps even more disturbing, however, is that the flat tax (any flat tax, whether an option or not) does not address the full range of economic challenges that this country faces nearly as comprehensively or effectively as the FairTax. Included in this list are:
1. This country's negative savings rate,
2. The enormous and growing trade deficit,
3. The Social Security and Medicare crisis,
4. The spiral of complexity and higher compliance costs

It also does not restore our financial privacy and Constitutional rights to the extent that the FairTax does. The Founders rejected this type of tax system and the Supreme Court struck down an attempt to levy an income tax
during the late 1800s. That is why congress had to ratify the 16th amendment. Now the question is who had it right - the Founders and the Supreme Court of the late 1800s or the congress of 1913? I would take the Founders and Supreme Court.

One last point is that we already have a flat tax option within our current system. It is called the Alternative Minimum Tax (AMT). It is basically a flat tax with many deductions stripped out for simplicity. The major
difference is that the option lies with the government with the AMT and not the individual.

I don't consider the flat tax option a serious proposal because it isn't revenue neutral and I don't consider any flat tax as beneficial economically nor as politically viable as the FairTax. You can't make the numbers work
out with a flat tax replacement system to keep some from being hurt and those are typically those at the low end of the economic ladder. That is why the idea of a flat tax option has gained some traction - it is the last
hope for flat taxers who have seen their other flat tax proposals go up in flames.

Confessions of a former flat taxer: FairTax is better
By DENIS CALABRESE
SPECIAL TO THE DesMoines Register
April 24, 2007
Link to web story with blogs

As presidential candidates crisscross Iowa in coming months, one of the few things they will all have in common is an unwillingness to defend our disgraceful federal income-tax system. It penalizes workers, savers, the poor, the elderly, American farmers and manufacturers, small businesses, entrepreneurs - just about everyone except tax lobbyists and their well-heeled clients.

But will presidential hopefuls embrace a real alternative? Two primary substitutes have been put forth: The FairTax Plan and the flat tax. The FairTax would replace all federal income and payroll-based taxes with a national retail sales tax of 23 percent. A monthly rebate paid to all citizens in advance would, in essence, cancel out taxes on spending up to the poverty level.

Both the FairTax and flat tax would reduce marginal tax rates and the destructive tax bias against earnings, savings, and investment. Both end double and triple taxation of savings and investment. Both systems are better than our current broken mess, but the FairTax is hands down better economically and politically than the flat tax. Fundamental tax reform is not going to be accomplished twice in our lifetimes, so we should choose wisely.

As a former chief of staff to the congressman who was the flat tax's most vocal supporter, I was a strong flat-tax proponent until the FairTax was developed. The flat tax is a vast improvement, but I want the best possible system. And that's the FairTax.

The flat tax strives for transparency but retains the corporate income tax and payroll taxes, which embed invisible federal taxes in everything we buy. It strives to encourage work, but retains a direct tax on labor. The FairTax abolishes the income tax, payroll tax, corporate income tax, gift and estate taxes and all federal taxes based on income. The FairTax broadens the taxpayer base by capturing the underground economy, illegal immigrants and those who have bought their way out of the tax code. The flat tax does not.

The FairTax eliminates the intrusive, inefficient IRS; the flat tax retains it. The FairTax abolishes individual income-tax forms; the flat tax does not. The FairTax untaxes education; the flat tax does not. The FairTax imposes no tax on small businesses or farms, but the flat tax may tax small businesses and farms even if they are losing money.

International competitiveness is another key area of difference. Our tax system actually subsidizes foreign products by exempting them from taxes, but it penalizes American farmers, manufacturers and other exporting businesses by imposing taxes on our exports. The flat tax makes this even worse. The FairTax stops this senseless, self-inflicted economic damage.

Unlike most tax proposals, the FairTax does not pit one income or political group against another because it offers advantages across the economic and political spectrums. It abolishes all federal taxes on the poor, raises real wages, promotes the "Made in America" label and American jobs and untaxes pensions and Social Security. It taxes accumulated wealth when spent and is highly pro-growth because it untaxes earnings, savings and productivity; repeals corporate income taxes and estate taxes; and promotes investment and capital formation. It reduces marginal tax rates for most Americans.

The flat tax is not as progressive, not as pro-growth and not as transparent. The flat tax retains the same vulnerability to politics that will let lobbyists and politicians again create the very same complex, loophole-filled, unfair system we have today.

More co-sponsors endorsed the FairTax in the first two weeks of the 110th Congress than endorsed the flat tax in the past five congressional sessions combined. The FairTax has hundreds of thousands of supporters across all party lines. On the merits, the FairTax is truly best for America in the 21st century and beyond.

DENIS CALABRESE, chief strategist for FairTax.org., is a public policy and communications professional and the former chief of staff to Congressman Dick Armey.