The flat tax retains the invasive income tax administration apparatus.
Under a flat tax, individuals would still file an income tax return each year similar to today’s 1040 EZ. While this is a simple postcard, the record keeping required to fill in the blanks is still long and burdensome. Under the FairTax, individuals would never file a tax return again, ever! Under the flat tax, the payroll tax would be retained and income tax withholding would still be with us. Under the FairTax, the payroll tax, which is a larger and more regressive tax burden for most Americans than is the income tax, would be repealed. Under the FairTax, what you earn is what you keep. No more with-holding taxes; no more income tax.
Since he FairTax plan removes the payroll tax while the flat tax keeps it, the FairTax makes it eaiser for the working poorto climb out of the dependency trap. In contrast, the working poor will continue to pay the 15.3 percent payroll tax on their first dollar earned under the flat tax. Under the Fair Tax, payroll taxes are repealed, a rebate of the consumption tax on expenditures up to the poverty level is provided, and all tax costs currently embedded in the retail supply chain are eliminated. Thus the marginal tax rate the poor face is zero up to the poverty level spending, and therefore, lower under the Fairtax than under the flat tax.
A flat tax is easy to convert back to an income tax. A flat tax fully preserves the IRS infrastructure.
Fairtax vs. Flat Tax