Flat Tax vs Progressive Tax Calculator

How it works

progressive tax = Σ (income inside each bracket × that bracket’s rate) · flat tax = (income − allowance) × flat rate · effective rate = tax ÷ income · difference = progressive tax − flat tax

Under a progressive system each slice of income is taxed at its own bracket rate, so the effective (average) rate rises with income but is always below the top (marginal) rate. A flat tax applies one rate to all income, usually above a tax-free allowance — which itself makes a flat tax mildly progressive. Countries such as Estonia, Hungary, Romania and Bulgaria use flat personal income taxes. Enter any bracket schedule to see which system costs a given income less; low incomes usually pay less under progressive brackets with a zero band, high incomes under a low flat rate.

Worked example

With $60,000 of taxable income, brackets of 0% to 10,000, 20% to 40,000, 30% to 100,000 and 40% above give a progressive tax of $12,000.00 (an effective 20.00%, top bracket 30%). An 18% flat tax with no allowance is $10,800.00 (18.00%). The flat tax saves you $1,200.00.

Sources: Wikipedia — Flat tax · Tax Foundation — Flat tax · Wikipedia — Progressive tax

Frequently asked questions