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Fairness?
• absolute equity – all benefit from government – all should pay equally(head tax)
• Ability to pay -- justification for progressive taxation (graduated income tax)
• Benefit principle -- tax in proportion to the benefit (gas tax, social secuirty)
Economic Neutrality --
Tax systems should exert minimal impact on the spending and business decisions of individuals and businesses.
Tradeoff: creating incentives for positive social behavior (“sin taxes”)
Visibility
• Taxes should not be hidden – those who bear the burden should be aware
(Hidden taxes: Gross Receipts Tax, Lottery?)
Other principles
• Broad base (to allow lower rates)
• Predictable and stable supply of revenue
• Diverse sources (for stability and lower rates)
• Addresses geographic competition
Federal Government Outlays and Receipts (millions)
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