If the farmer takes $1 out of his business as personal income, it's taxed. If the business makes $1 of profit beyond what he takes out as personal income, it's taxed.
Of course you have overlooked the fact that Congress defines what is allowed in business deduction to even get to the point of determining what is defined to be income to be taxed. The realm of creative tax preparation and loopholes, that are so profitable to the tax preparation and consultant business, lay in the supporting regulatory environment that goes with defining what is and is not allowed as business expense in the eyes of Congress and the IRS.
Indeed Vern Hoven is quite correct, and why the current system is the complex mess it is today.
It isn't the number of tax brackets or size of the final report card that makes for the complexity of an income tax system. It is the rules governing the separation of business expense from taxable income where the opportunity lay for an ever expanding tax code which the Flat Tax can do nothing to change.
The first implementations the income tax system were little more than what is claimed for the Flat Tax, the devil as always lay in the details, the ever expanding number of details to compensate for the creative accounting of those who thrive in the income tax preparation industry.
Theinherent problem with any income tax is always separating what Congress considers to be business expense from income to be taxed. The definition of business expense is not at the option of business, it is the neverending quest of the lobbiest interacting with the Congress critter setting the agenda of such definition and consequent growing plethora of regulation that goes with it.
The form a tax due is written on has little to do with what it takes to get there or establish the varacity and accuracy of what goes onto that form to which government holds the taxpayer accountable through audit and other intrusive measures employed by tax system administrators.
Of course you have overlooked the fact that Congress defines what is allowed in business deduction to even get to the point of determining what is defined to be income to be taxed.Not with the Flat Tax. That is spelled out very clearly and easily. You must be thinking of the current system.