HALL RABUSHKA FLAT TAX PDF

November Hall and Rabushka present a very clear and convincing argument for a "flat tax," an income tax with a single rate and very few deductions like that proposed by Malcolm "Steve" Forbes during the Republican Presidential primary elections. They argue that the current income tax system wastes hundreds of billions of dollars by diverting resources away from more productive uses. However, their argument is mainly an economic one and neglects some of the very important political forces that determine the full impact of a government policy on the quality of life. The Flat Tax is Standard Economics but not Good Common Sense Hall and Rabushka explain that our current tax system has two problems - two problems that might be solved with their flat tax. First, the current system is very complicated.

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What is the flat tax? While any tax system with flat rates could be called a flat tax, the name is usually reserved for a system developed by Robert Hall and Alvin Rabushka in Their flat tax is really a two-part VAT: All value added except wages is taxed at the business level and wages are taxed at the individual level at the same flat rate but with an exemption related to family size.

The Hall-Rabushka flat tax would replace the current income tax system with a consumption tax. Their system is a two-part value-added tax VAT. All value added would be taxed at the business level except wages, which would be deductible. Wages would be taxed at the individual level, with an exemption based on family size. All taxable wages and all business non-wage value added would face the same flat rate. In short, the flat tax is a consumption tax, even though it looks like a wage tax to households and a variant of a VAT to most businesses.

Therefore, except for the exemptions, the economic effects of the flat tax are essentially the same as those of a VAT or a sales tax. The flat tax can be split into two parts: the business tax and the individual tax.

Firms would be responsible for paying taxes at a flat rate on sales after they have deducted wages, pensions, material costs, and capital investments. Individuals would be responsible for paying taxes again, at a flat rate on the wages that firms have deducted, but only on wages in excess of an exemption level. Further Reading Aaron, Henry J. Economic Effect of Fundamental Tax Reform. Gale, William G. Cordes, Robert D. Ebel, and Jane G.

Gravelle — Hall, Robert E. The Flat Tax.

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How Could We Improve the Federal Tax System?

What is the flat tax? While any tax system with flat rates could be called a flat tax, the name is usually reserved for a system developed by Robert Hall and Alvin Rabushka in Their flat tax is really a two-part VAT: All value added except wages is taxed at the business level and wages are taxed at the individual level at the same flat rate but with an exemption related to family size. The Hall-Rabushka flat tax would replace the current income tax system with a consumption tax.

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The Flat Tax

Cordes, Robert D. Ebel, and Jane G. Order online at www. The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration.

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Hall–Rabushka flat tax

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