Flat Tax Withholding

What Is Flat Tax Withholding?

Flat tax withholding refers to a uniform 22% federal income tax withholding rate for supplemental wages (overtime, bonuses, commission, etc.) up to $1 million annually. For supplemental income during the calendar year that exceeds $1 million, the flat tax withholding rate is 37%.

What Is a Flat Tax?

A flat tax is a tax system in which all individuals are taxed at the same rate regardless of income level. While it's technically a more simplified system, free of complex tax brackets or varying rates to calculate, the main critique of a flat tax is that it places an excessive burden on people earning lower incomes.

To address this concern, some flat tax proposals include exemptions or deductions to offset the regressive effects faced by individuals earning less.