Flat taxes weaken the economy, increase fiscal inequality, and create a race to the bottom, hurting competition worldwide.

First, while there is no doubt that many countries that have adopted the flat tax have had booming economies, there is no actual proof that the flat tax is the reason why these nations have grown. After all, many of these places were Communist nations behind the Iron Curtain. Once the Soviet Union collapsed they were able to open up their economies to investment and had an easier time trading with the developed countries in the west.

In addition, a flat tax may not be as fair as one would think. A gradual tax system does allow for things like wealth redistribution, which many have argued is a major benefit to society. And a flat tax could also give middle-class families an extra burden. If someone making one million per year has to pay 18% of his income in taxes, he still has netted $820,000 for the year, a figure which still has great purchasing power. But a person making $50,000 per year is left with $41,000 per year; that difference can influence fiscal decisions, like purchasing a new car versus a used car, whether to place a down payment on a house or affording either a state school or private college, extremely tough for people who make closer to the national median income level.

In addition, when a group of countries near each other enact a flat tax, it creates a race towards the bottom; in order to compete, nations must keep on lowering their tax rates, a problem that could lead to fiscal instability.

Lastly, in the wake of the 2008 recession, many countries that adopted a flat tax have suffered greatly. Take, for instance, Latvia, one of the earliest countries to adopt the flat tax. Its overheated economy suffered a near-complete liquidity squeeze, which caused its GDP to decline approximately 25% between 2008 and 2010, and unemployment to climb to nearly 21% of the population.8 It had to take a bailout from the International Monetary Fund in order to pay public sector workers.

The country recovered but decided to ditch the flat tax on personal income in 2017.9 It now has a progressive system with rates rising from 20% to 31% as a taxpayer's income increases.10

Latvia's Baltic neighbors, Lithuania and Estonia, also faced similar pitfalls during the global Great Recession. All of this, some say, is a sign that these nations failed to raise enough tax dollars due to their tax policies. Others, however, say that these nations rely on exports, which suffered greatly due to the downturn facing major economies.