reform. However, because only the Armey/Shelby has spent a generous amount of time in the public eye there is limited discussion on the other proposals. For the purpose of a fair analysis of the flat tax this paper will focus on the basic structure of the flat tax as created by Robert Hall and Alvin Rabushka. Proponents and critics of the flat tax agree on at least one aspect of the flat tax, simplicity. The flat tax replaces the endless exemptions and loopholes with a postcard-size form that all Americans would fill out whether they are a CEO or young kid flipping burgers. The Tax Foundation estimates that a flat tax would reduce compliance costs by 94 percent, freeing up resources that are currently wasted on record keeping, filing forms, learning the tax code, litigation, and tax avoidance, saving taxpayers more than $100 billion in compliance costs each year (Armey 3). One of the major areas that proponents of the flat tax claim fame to is the issue of fairness. They argue that no matter how much money a person makes or what they do, they will be taxed the same as every other citizen. With the elimination of deductions there are no loopholes to help the wealthy get out of paying taxes. Critics argue that by eliminating taxes on capital income the gap between rich and poor will become even bigger. By eliminating the current tax on savings and investment not only will future taxes on savings be avoid, but so will existing savings and investments. This would represent a huge tax windfall to current investors, most of who are in the top five percent of the income distribution (Hamond 1). Families with the same total income will face vastly different tax burdens depending on how they earn their income. The family that earns a larger share of its income from labor will pay a higher personal tax than the family that collects more of its income from interest, dividends, and capital gains (Hamond 1). Those in favor of the flat t...
