ABSTRACT
The debate over income tax reform involves both the selection of the appropriate tax base and the structure of statutory rates. This chapter identifies the major features of various tax schemes with respect to both the rate structure and the tax base. It presents a classification of flat tax proposals aimed at facilitating the evaluation of their economic effects presented in subsequent chapters. As a taxpayer moves to a higher tax bracket, the additional taxable income attracts a higher tax rate. Therefore, as income increases, the proportion of each additional dollar paid in taxes rises, in a stepwise fashion, up to the last tax bracket. In Canada, versions of both income-base and consumption-base flat taxes have been proposed. The various flat tax proposals generate different changes to the existing tax bases for individuals, unincorporated businesses and corporations.
