essentially the flat tax would be a use tax on purchases and services. "luxury" items would be taxed higher. some states tax prepared food, like at restaurants higher than their regular sales tax. I like the idea of you get taxed on what you use/buy. This helps get rid of the tax shelters and b.s. like keeping money in the Cayman islands. I think it's called "the fair" tax but I can't remember for certain.
the capital gains tax could then be set to zero since capital gains would be used to purchase stuff, which would be taxed. zero capital gains encourages investing which is a good thing. taking investment losses reduces your capital gain tax currently, so it's a game, game of avoiding taxes. The rich people pay professional players to avoid taxes, it's always been that way and will always be if changes aren't made. But since the rich are in control it's not likely it will ever change.