Then what is the huge difference between a system with two tax brackets and seven tax brackets? Why is one acceptable and the other is not?It is absolutely a flat tax, it's just not dogmatically flat. You're playing semantic games. Flat tax systems the world over have exemptions like this. If it makes you feel better to call it a single step progressive tax, fine. Let's hold hands and agree we need a single step progressive tax.
Several. First, having fewer tax brackets makes it significantly harder to raise taxes as it largely nullifies a the divide and conquer strategy of raising rates one bracket at a time. Second, and this is implied in my use of the term flat system, the elimination of all other deductions, exemptions, credits, etc. shuts down the K Street favor factory. Third, this radical simplification of the code would free up an amazing amount of capital for other, and far more useful, purposes. There have been several studies on the subject, but from memory the complexity of the US tax code is such that for every $1 of tax paid businesses also pay something like $0.30 to prepare and quality check their tax returns. That is a phenomenal waste of money when you consider how much business pays in taxes every year.Then what is the huge difference between a system with two tax brackets and seven tax brackets? Why is one acceptable and the other is not?
I was responding to someone who was proposing taxing every cent of income at the same rate.Goober, you're nitpicking over something that is not real. Every state flat tax in the country and every credible federal flat tax proposal I have ever seen has an exception for income earned below the poverty level. Thus the example you give above is nonsense; it doesn't apply in the real world of flat tax systems and never has.
Based on what criteria?Not even close to fair. I’d call it confiscatory.