Several states have flat income taxes as of 2016. Since no taxes are paid on income exceeding $127,200, payroll taxes are technically regressive. A payroll tax (Social Security and Medicare) is a flat tax because everyone pays 7.65 percent of their income - that is until they earn $127,200, after which the marginal rate falls to zero. The average and marginal tax rates are equal with a flat tax because the next dollar earned is taxed at the same rate (marginal tax rate) as the first dollar earned. The Israelites were commanded by God to pay 10 percent of their income. The oldest example of a flat tax is the biblical concept of tithing. A family earning $100,000 would pay $25,000 in taxes, and a family earning $50,000 would pay $12,500. For example, assume the tax rate is 25 percent. In a truly flat tax, every dollar earned from the first to the last dollar would be taxed at the same rate. When all income is taxed at the same rate, the tax is a flat tax or proportional tax. View FREE Lessons! Definition of a Flat Tax:
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