Marginal impact is greater. Using the numbers I listed above your marginal tax rate at a income of $10k/year is NEGATIVE 100%, at an income of $100k/year it would be 0%, at $500k/year it would be 8%, at $1m/year it would be 9%... asymptotic increasing towards 10%.
> ...there is always a positive incentive to higher income
Sorry, you are correct. I should have said there is increased income doesn't increase disincentives.
> Only if the flat rate is set very high compared to the existing rates paid by most of the population.
The point wasn't being made on total net revenue but on cost per dollar collected due to compliance enforcement and bureaucratic overhead. Regardless the flat tax rate CAN be set very high as long as there is a corresponding offset in the MBI. Ultimately the ACTUAL rate people pay could be similar to the amount they currently pay but normalized over the population as a whole.
> If this includes taxing capital gains as income
> To do this, government has to alter the definition of taxable income
Which is why I specifically mentioned ALL income.
> This does not eliminate their ability to make similar decisions in the future
This is very true, and probably the strongest argument you made in your post. Hopefully such exemptions would "stand out" with such a simplified tax structure but any government that exists will continually work to expand it's power at the expense of the governed.
> Everybody feels the effect of rate changes now
Everybody does NOT feel the effects of a rate change as often lower tax rates are unmodified while higher tax rates are adjusted.
> Define "market freedom".
Sorry, "market freedom" is both to general and arguable incorrectly used in this case. I should have said it equalizes market manipulation by the government.