Flat Tax Act of 2005

The Flat Tax Act of 2005 proposed a significant overhaul of the American tax system by replacing the existing progressive income tax brackets with a single 20% flat tax rate for both individuals and businesses. For individual taxpayers, this 20% rate would apply to all earned income—such as wages and salaries—after accounting for a standard deduction, home mortgage interest, and charitable contributions. Additionally, the bill sought to simplify the tax code by repealing several existing taxes, including the estate and gift taxes, while eliminating various credits and subsidies.

For the average citizen, this legislation would have simplified the filing process by creating a uniform tax rate regardless of income level, though it would also have removed many specialized deductions and credits currently available. Businesses would have been taxed at the same 20% rate on their gross active income after deducting the costs of business inputs, employee compensation, and equipment. While the bill was introduced in the Senate and referred to the Committee on Finance, it did not advance further in the legislative process and never became law.