Economists generally use two criteria to judge the fairness of a tax system:

• Horizontal equity -- the equal treatment of people with the same incomes -- is frequently violated by the U.S. tax system, since savings and investments are taxed two or three times.
• For instance, a corporation pays taxes on its profits; and when those profits are distributed to shareholders, they pay a personal income tax; and if they leave the share to their children, the kids pay an inheritance tax.
• A flat tax would be levied when income is earned; the income would not be taxed again, making it fairer than the current system.
• Vertical equity -- the idea that better-off taxpayers should pay more tax -- is satisfied by most tax schemes, and in a flat tax with a basic exemption, those with higher incomes would proportionately pay more.

High-income people now pay a larger share of their income in federal income taxes than lower-income people do. In 1990, the top 1 percent of the income distribution paid 27.2 percent of their income in total federal taxes, whereas families in the lowest 20 percent paid only 9.7 percent.

Thus if the flat tax is fairer, it should benefit higher income workers more. A recent Reader's Digest poll asked what percent of their income a family of four making $200,000 should pay in total taxes to all levels of government. The median response of almost all income and demographic groups was a maximum of 25 percent -- less than the 39 percent that family now pays in federal taxes alone.

Source: David R. Henderson, "Why Flatter Taxes Are Fairer," Fortune, September 9, 1996.