Considerable congressional support developed as well. As a result, the flat-tax concept promises to be a major part of the upcoming campaign. Let's briefly examine each one to understand the underpinnings of the flat-tax proposal. The first argument, simplicity, at least initially turns on the concept of a single tax rate. This part of the simplicity argument is a transparent straw man.
Progressive rates add virtually no complexity to the Internal Revenue Code.
Moreover, it is a very simple thing to build into tax planning and tax preparation computer software. A more telling argument with respect to the single-rate proposal is its elimination of rate differentials between types of income. The most common such differential is between ordinary income, currently subject to a maximum rate of 39.6 percent, and capital gain, currently subject to a maximum rate of 28 percent. There certainly is considerable complexity built into the code and into the analysis of economic transactions in trying to distinguish ordinary income from capital gain. While the answer is clear in many circumstances, there are others in which tax planning for this rate differential creates considerable complexity.