This alone makes this politically nonviable. The political class would never let investors escape taxes.
A better proposal would have been to index capital gains for inflation, so that only the real gain is taxed and not the paper gain due to the devaluation of money. Eliminate double taxation of dividends by making them a deductible expense for corporations, and dividends would only be taxed once at the individual tax rate.
Under these circumstances, the flat tax rate could be lowered even further.
A Flat Tax never stays flat.
In the history of the United States there have been 4 flat taxes beginning in 1861. Prior to that there was serious talk but never any legislation passed on it. Each of the flat taxes were amended to become graduated. Like cancer a flat tax metastacizes to what we have today.
Taking what we have today and stuffing back into a flat tax is very sloppy surgery allowing the disease to reappear later.
A Flat tax without apportionment can only exist under the 16th Amendment.
The 16th Amendment is a license to tax at will, to allow Congress to play with tax codes to satisfy their vested and special interests.
There have been 5 major tax reforms since the 16th Amendment was passed in 1913. Each such reform sought to make the tax code simpler and ‘flatter’. Each time the reform unraveled and failed.
Since the last major tax reform in 1986 there have been more than 20,000 amendments to the tax code. There is an entire industry engaged in rewriting and amending the tax code. The 16th is their business license to do this.
Any Flat Tax is a failure waiting to happen.
The solution is the FairTax, a consumption tax that starts only after everyone has spent the equivalent of essentials for living.
More here:
http://www.fairtax.org/site/PageServer?pagename=FAQs