Glossary

Flat tax

An income tax with one rate for everyone, usually paired with a large exemption and few deductions.

Also called: flat tax, single-rate income tax

A flat tax applies one rate to all taxable income, rather than rising rates by bracket. Most proposals pair the single rate with a generous personal exemption, so that low-income households pay nothing, and eliminate most deductions and credits, to simplify filing.

Economists Robert Hall and Alvin Rabushka outlined a well-known version in the 1980s, and proposals by candidates such as Steve Forbes and Rick Perry in later years kept the idea in the public debate. A number of countries, mostly in Eastern Europe, adopted flat taxes in the 1990s and 2000s, though some have since added brackets. Several U.S. states use a single rate for the state income tax.

Supporters argue that a flat tax is simpler, reduces the gains from loopholes, lowers the top marginal tax rate and treats everyone alike. Critics argue that it shifts the burden toward middle-income households and away from high earners compared with a progressive tax, and that the exemption means it is not fully flat; revenue-neutral versions would require a higher rate than current lower brackets. Debates often involve the loss of tax expenditures, such as the mortgage-interest deduction.

Last reviewed November 8, 2026

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Related terms

Progressive tax A tax whose rate rises as the taxpayer's income or wealth rises, so higher earners pay a larger share. Marginal tax rate The tax rate that applies to the next dollar of income, as distinct from the average rate on all income. National sales tax A proposed federal tax on retail purchases that would replace income and payroll taxes, usually with a rebate for households. Regressive tax A tax that takes a larger share of income from low earners than from high earners. Tax expenditure A provision of the tax code, such as a deduction or credit, that reduces tax owed to encourage a behavior, functioning like government spending.