A flat tax is used when the same tax rate is applied to every taxpayer, irrespective of income level. A pure flat tax applies the same tax rate to all types of income. A more common approach is to allow certain deductions from the flat tax rate, or to not apply the tax to certain types of income, thereby altering the effect of the tax on sub-sections of the taxpayer population. Most income tax systems are progressive, where higher earners are charged a higher income tax rate than lower earners, thereby subsidizing low earners.
A flat tax tends to shift the tax paying burden from high income earners to low income earnings, while taxpayers in the middle income ranges are relatively unaffected. This type of tax creates a greater incentive to earn more money, since high earners can take home a larger percentage of their income.