Income tax reform has become a hot topic in both the United States and Canada. Over the past few years, a variety of proposals have been advanced for the replacement of the current income tax system and most proposals involve a compression of the multi-rate structure into a single rate and a shift to some form of consumption tax base. Flat taxes are advocated on the belief that they will provide a strong stimulus to investment, employment and output. Their supporters are convinced that the economic benefits are sufficiently large to make everyone better off, therefore there is no need to be concerned about the distributional effects of flat taxes. However, the claims about potentially large efficiency gains from flat taxes are not supported by research. Evaluating the effects of a consumption-base flat tax of the type proposed by Hall and Rabushka is one of the main purposes of the paper. Using a microdata set for Canada, which allows identifying taxpayers by both income level and family type, we show tha...