Second article in a series Understanding the Great Income Tax Debate The primary purpose of the tax system is to collect the revenue needed to fund the operations of the federal government, including its promises and commitments. Whether the resources to fund government spending are provided through taxes or borrowing has consequences for the economy and the federal budget. Ones view of the tax system is based on subjective judgments about the fairness of the distribution of tax burdens. Taxes impose efficiency costs by altering taxpayers behavior, inducing them to shift resources from high valued use to lower valued uses in an effort to reduce tax liability. The criteria for a good tax system are: Equity, economic efficiency, simplicity, transparency, administrability,and transition. Designing tax policy requires making trade-offs among these criteria. For example, a proposal to improve the efficiency and simplicity of the tax codes may involve eliminating exemptions and deductions originally introduced to improve the equity of the system. Because moving to an alternative tax system creates winners and losers, transition rules may be included in the tax reform proposals to mitigate some of the windfall gains and windfall losses that are likely to occur. . |
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CategoriesPay the least amount of taxes as the law allowsThe Great Income Tax Depate - Should the wealthy pay more Web Site |
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