What is an inherent risk of a flat tax system?

A flat tax system, which applies the same tax rate to every taxpayer regardless of income level, inherently poses several challenges, notably the increased tax burden on low-income individuals. In such a system, those with lower incomes pay the same percentage of their income in taxes as those with higher incomes. This can disproportionately impact low-income earners, as they have less disposable income available after taxes compared to wealthier individuals.

For example, consider a scenario where both a low-income individual and a high-income individual earn $30,000 and $300,000, respectively, and both are subject to a 15% flat tax. The low-income individual pays $4,500 in taxes, which may leave them with just $25,500 for living expenses. In contrast, the high-income individual pays $45,000 but retains a significantly greater amount of their income. The flat tax fails to consider the differing impacts of the same tax rate on varying income levels, which can lead to issues of fairness and equity in the economic system.

While elements like encouragement of economic growth, complex tax administration, and higher compliance costs may be relevant in discussions about tax systems, they do not address the specific and direct impact a flat tax system has on low-income individuals,