Proportional Tax

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A proportional tax system, also called the flat-rate tax, assesses the same percentage rate of taxation on everyone, regardless of income. If the proportional tax rate were set at 20 percent, an individual making $10,000 would pay $2000 in taxes; a person with an income of $50,000 would pay $10,000; and a person making $100,000 would pay $20,000. Even as the income goes up or down, the percent of total income paid in taxes does not change. It is the same percentage at all income tax brackets.

Many state income tax systems are very close to being proportional tax systems. High-income individuals, under a proportional tax scheme do pay more than lower-income people. However, public debate centers on the idea that high-income persons can better afford to pay their taxes while low-income persons need all their income to meet basic needs and are, therefore, hurt by a proportional tax. In the 1990s the flat-rate tax was touted as a way to greatly simplify a complex tax system and, for many people, as an overall tax savings in comparison to the progressive tax system.

See also: Progressive Tax, Regressive Tax