Policy Documents

Research & Commentary: The Flat Tax - Will it Be Coming to Your State?

Nick Baker –
March 3, 2008

While millions of Americans wait for Congress to consider a national flat-rate income tax, an increasing number of proactive governors and legislators are "flattening" taxes at the state level.

Leaders in Colorado, Illinois, Indiana, Massachusetts, Pennsylvania, Rhode Island, and Utah have shown a flat tax is a viable alternative to a progressive income tax. At least two states, New Mexico and South Carolina, are considering it this year.

There are a variety of benefits from the flat tax. Chief among them:

  • A state's most-productive citizens are no longer penalized or discouraged by tax rates higher than rates paid by less-productive citizens;
  • The tax code is made less complex by the elimination of credits, exemptions, and deductions;
  • Businesses are treated more fairly, as all are subject to the same tax rules, relegating preferences to the trash heap; and
  • Economic growth is encouraged, increasing investment and savings.

Not only are an increasing number of states moving toward a flat tax, but entire countries are doing so. Flat taxes are prevalent in eastern European countries whose citizens once suffered under draconian Soviet economic policies. Iceland recently became the first western European country to adopt a flat tax.

States are the laboratories for innovative public policy. The Heartland Institute invites you to read the following articles on the flat tax "revolution" sweeping across the U.S. ... and the world.


The Flat Tax's Silver Anniversary
http://www.hoover.org/publications/digest/6731056.html
Alvin Rabushka, the David and Joan Traitel Senior Fellow at the Hoover Institution, offers a history of the flat-rate income tax. "First proposed 25 years ago, the flat tax has proven most influential in the unlikeliest of places: state capitals--and the capitals of other nations," he notes.

A Brief Guide to the Flat Tax
http://heartland.org/Article.cfm?artId=17618
Everything you wanted to know about the flat tax from Dan Mitchell at The Heritage Foundation. Among the benefits of the flat tax: It eliminates special-interest favoritism and prevents taxpayers from scamming by hiring enough lawyers, accountants, and lobbyists.

Rhode Island Enacts Pro-Taxpayer Reform Package
http://www.heartland.org/Article.cfm?artId=19424
This August 2006 report from Budget & Tax News describes how a Republican governor and Democrat-controlled legislature worked together for the benefit of Rhode Island taxpayers.

Utah Cuts Income Tax, Offers Flat Tax to All
http://www.heartland.org/Article.cfm?artId=20221
In a late 2006 special session, the Utah legislature passed a tax reform measure including an optional flat-rate income tax.

The Global Flat Tax Revolution
http://www.cato.org/pubs/policy_report/v29n4/cpr29n4-1.pdf
Writing in the July/August 2007 issue of Cato Policy Report, Daniel J. Mitchell describes other countries' successes with the flat tax.

Research and Commentary: The Case for the Flat Tax
http://www.heartland.org/Article.cfm?artId=22411
The Heartland Institute offers a collection of valuable articles about the flat tax how it is being used to boost economies and enhance personal freedom and privacy.


For more information on the flat-rate income tax, visit PolicyBot™, The Heartland Institute's free online research database, accessible from the Heartland Web site home page at http://www.heartland.org. Browse the topic/subtopic combination Taxes/Flat Rate Income. If you have any questions about this issue or the Heartland Web site, you may contact Nick Baker, Heartland's legislative specialist for budget and tax matters, at 312/377-4000 or at nbaker@heartland.org.