Suppose the current progressive income tax structure is scrapped and replaced by a 15 percent tax on all income with no exemptions or deductions allowed except that the first $10,000 of income will not be subject to taxation. Explain why this so-called flat-rate tax is really still a progressive-rate structure. How will the elimination of tax preferences affect resource allocation and prices in markets? How could the reform, if it really simplified the complexity of the tax code, save resources? What are some common objections to the flat-rate tax?
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