One tax system being reviewed for Canadian tax reform is the flat tax. Under a flat tax all income is taxed only once and at the same rate.
In addition to its economic benefits, proponents say a flat tax would achieve greater fairness: households with similar incomes would face similar tax burdens and single and two-income households would be treated more equally.
Canadian researchers analysed various representative families and diverse incomes to compare the amount owed under the current income tax system with what taxpayers would owe under the flat tax. Here are some specific examples – which assume a federal flat tax rate of 18.2 percent (replacing income tax revenues only), a personal exemption of C$8,766 and a C$2,000 per child exemption. Taxpayers would not be taxed on the exempt amounts of income, making the flat tax progressive (higher income taxpayers would pay a greater proportion of their income in taxes than lower-income taxpayers).
In the above examples, all taxpayers pay less, but the high-income, highly taxed family experiences the largest reduction. Therefore the tax burden is somewhat equalised.
Source: Joel Emes and Jason Clemens, Flat Tax, Principles and Issues, Critical Issues Bulletin, April 2001, Fraser Institute, 4th Floor, 1770 Burrard St. Vancouver, B.C., V6J 3G7, (604) 688-0221.
For study text http://www.fraserinstitute.ca/publications/critical_issues/2001/flat_tax/ind ex.html
For more on Tax Liability Under a Flat Tax http://www.ncpa.org/pi/taxes/tax71.html#2
