Which of the following statements about a flat tax rate on personal income is correct?
A)A flat tax raises more revenue that a regressive tax.
B)A flat tax removes the incentives for tax avoidance through loopholes and other mechanisms.
C)Estonia and Russia have abandoned the use of a flat tax because they were unable to administer it.
D)When a flat tax rate is combined with a threshold that exempts some income, the rich will pay less under a flat tax system than they do under the present U.S.system.

Question

Quizplus · Accepted Answer

A flat tax rate removes the incentives for tax avoidance through loopholes and other mechanisms because all income is taxed at the same rate, so there is no advantage to finding loopholes to reduce or avoid taxes. This has been one of the arguments used in favor of a flat tax system. None of the other statements are correct: A) It is not necessarily true that a flat tax raises more revenue than a regressive tax, as this depends on the specific details of the tax system. C) Estonia and Russia have not abandoned the use of a flat tax system; in fact, they still use it. D) If a flat tax rate is combined with a threshold that exempts some income, the rich may pay less or more under a flat tax system than they do under the present U.S. system, depending on the exact details of the tax rates and thresholds.

Which of the Following Statements About a Flat Tax Rate