Flat Tax, Equity and Politics

21 Pages Posted: 2 Nov 2000

See all articles by Philip T. Ganderton

Philip T. Ganderton

University of New Mexico - Department of Economics

David Hineline

Ohio State University (OSU) - Economics

Date Written: May 2000

Abstract

We study a simple flat tax proposal that combines the federal income tax and the payroll tax. This tax reform may have a higher probability of political acceptance by treating the large middle income classes more favorably than other flat tax reform proposals. Our analysis compares the distribution of marginal and average tax rates across income groups for the current system, and two revenue neutral flat tax alternatives. Replacing the current federal income tax rate structure and the payroll tax with a flat 36 percent tax on personal and business income above a generous threshold offers significant tax relief for the lowest income classes, offers middle income earners lower average tax rates and spreads the burden of the present regressive payroll tax to the highest income classes.

JEL Classification: H20

Suggested Citation

Ganderton, Philip T. and Hineline, David, Flat Tax, Equity and Politics (May 2000). Available at SSRN: https://ssrn.com/abstract=238483 or http://dx.doi.org/10.2139/ssrn.238483

Philip T. Ganderton (Contact Author)

University of New Mexico - Department of Economics ( email )

1915 Roma NE/Economics Building
Albuquerque, NM 87131
United States
(505) 277 1962 (Phone)
(505) 277 9445 (Fax)

David Hineline

Ohio State University (OSU) - Economics ( email )

410 Arps Hall
1945 N. High St.
Columbus, OH 43210-1172
United States

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