To pay for those kinds of services, we must design general taxes that distribute the cost equitably among the people of the community. This article examines a type of tax that is far more regressive than the food tax, the retail sales tax, or any other sales tax the flat tax. That their proceeds often are earmarked for certain services, like solid waste removal, school construction, or public transportation, does not make them genuine fees or charges it makes them earmarked taxes. The term flat refers to the fact that these taxes are imposed on a unit as a flat amount, rather than as a rate on a base like income, spending, or property value that has some relationship to the taxpayers ability to pay. Since the 1980s the flat tax has been revived, but in its current form it falls on the household, rather than the individual, or is imposed as a flat amount on such units as existing homes and apartments, newly constructed homes and apartments, businesses, motor vehicles, and telephone bills.
Flat taxes violate both of the commonly held principles of tax fairness.
They violate the benefits-received principle because, although usually labeled charges or fees, they are imposed without regard to the amount of public services received. Although the amounts levied under some flat taxes might seem small, flat taxes may be quite substantial for lower-income families. Indeed, the total amount of flat taxes levied can exceed the amount those families paid in state sales taxes on food, and can be substantial when compared with property taxes they pay on their homes. Moreover, the potential for these amounts to grow, and for the use of flat taxes to expand, is very great. Thus the state retail sales tax, even with food exempt, is regressive, and the continued taxation of food sales under the 2 percent local retail sales tax is just as regressive as the state tax on food sales was.