More than one hundred years of tinkering and well-intentioned efforts to address a range of social and economic problems have produced a bewildering array of penalties and subsidies-a system that pleases no one, though it occasionally advantages various special interests and power brokers. Flat Tax of 20 Percent with a Generous Family Allowanceĭespite many attempts at reform, the federal tax code remains a major source of frustration and controversy for Americans, and an undue burden on economic growth and opportunity.

Source: Tax Foundation General Equilibrium Model, June 2023. Combined Long-Run Effects of the Growth & Opportunity Tax Provisions Gross Domestic Product (GDP)

When including the benefit of higher economic output, average after-tax incomes would rise by 3.5 percent in the long run.īy collecting a similar amount of tax revenue as the current tax code and increasing GDP, the reform would reduce the debt burden as measured by the debt-to-GDP ratio by 9.2 percentage points over the long run. The plan would increase average after-tax incomes by 1.1 percent in the long run on a conventional basis. taxpayers more than $100 billion annually.īy improving work and investment incentives and eliminating the double taxation of business income, we estimate the reform would boost long-run GDP by 2.5 percent, grow wages by 1.4 percent, and add 1.3 million full-time equivalent jobs. This report provides an analysis of the key features of the Estonian income tax system-a simple, flat individual income tax combined with a distributed profits tax-and its potential effects if implemented in the United States.īy simplifying the federal tax code, the reform would substantially reduce compliance costs, potentially saving U.S. Other countries, such as Estonia, have proven that sufficient tax revenue can be collected in a less frustrating and more efficient way. The federal tax code remains a major source of frustration and controversy for Americans, and a hindrance to economic growth and opportunity.

Pros and cons of flat tax rate