A flat tax is a percentage charge applied equally to everyone, regardless of their income level, investments, or other financial characteristics. The tax is "flat" because it can be graphed against any other factor and still result in a flat line, meaning that the revenue generated doesn't vary with the person's budgetary situation. For decades, American politicians and economists have proposed a flat federal income tax to replace the US's historically graduated system.

Local sales tax in the US is very similar to a flat tax. That is, the same tax rate is applied equally to everyone. Each county determines what that exact percentage is (e.g., 8.25%). Although some goods, such as food, are excluded, this is still, in many ways, a flat tax. No matter how much the payer earns, the same tax rate is applied to everyone when the same thing is purchased, from a pack of gum to an automobile.

The difference between a sales tax and the way the term "flat tax" is typically used, however, is what the tax is applied to. Usually, "flat tax" is used in reference to taxing people's income. Sales tax, however, is applied to people's expenses. Still, the two types of taxes are both flat in that they are applied equally to people regardless of their income level.

A long-standing debate on the fairest method of applying federal income tax has surrounded the question of instituting a flat tax. In a progressive system, those who earn less money per year pay at a lower percentage rate than those who earn an income that falls in a higher bracket. In a flat tax system, everyone of every income level would be taxed the same percentage, to be determined by further legislature.

Some advisors suggest that a simplified flat tax on income would not only be fairer but also save the government a considerable amount of money in bureaucratic fees. As it is, the Internal Revenue Service spends a lot of time and money investigating the proper filing of taxes, including exemptions or "write offs." Coincidentally, this proposed flat income tax is often paired with legislation that would eliminate tax exemptions, but these need not be linked. Proponents point out that much of the generated tax revenue is spent maintaining the tax system itself. They believe the IRS should be pared down such that the money can be better spent on other parts of the national budget.