re: Flat Tax Question

Step 1 - Define income subject to the flat tax. There is the problem in a nut shell. How do you define income? The classic economic definition is the change in wealth over time. Okay so you can pick a time period for measuring wealth, but how do you value assets like a home or car for measuring wealth. So the classic economic definition doesn't work.

What if we use an accounting approach and define income as revenues less expenses. Do we use cash basis accounting or accrual accounting? What will be the requirements for realizing revenue and expenses versus recognizing them? Will all expenses be treated equally?