Taxes

What Is a Flat Tax?

A flat tax is a tax system that applies a single rate to all taxable income, regardless of how much a person earns. Some flat tax systems include a basic exemption, so income below a threshold is untaxed. Several US states and some countries use a flat income tax.

Flat vs. Progressive

Under a progressive system, higher portions of income are taxed at higher rates. Under a flat tax, the marginal rate is the same for everyone, though an exemption can still make the effective rate rise with income.

Example

With a 5% flat rate, 50,000 of taxable income produces 2,500 of tax.

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🔗 Related Terms

Progressive Tax Marginal Tax Rate Effective Tax Rate State Income Tax

More Taxes Terms

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Last updated: September 29, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.