Flat Tax Act of 2007 - Replaces the income tax with a flat tax of 20 percent of taxable earned income of individual taxpayers. Defines "taxable earned income" as the excess of earned income (wages, salaries, professional fees) over a standard deduction, a deduction for cash charitable contributions, and a deduction for home mortgage interest. Sets forth definitions and special rules for surviving spouses, heads of household, and dependents.
Imposes a flat tax of 20 percent on business taxable income. Defines "business taxable income" as gross active income (other than investment income) reduced by: (1) the cost of business inputs (cost of specified goods, services, travel, and entertainment expenditures); (2) employee compensation; and (3) the cost of personal and real property used in business activities. Disallows a deduction from gross active business income for purchases of goods and services provided to employees or owners and certain lobbying and political expenditures.
Repeals: (1) estate, gift, and generation-skipping transfer taxes; (2) financing of presidential election campaigns provisions; and (3) coal industry health benefits provisions.