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Table of Contents
- Standard Criteria for Taxes and Tax Systems
previous
Table of Contents
- Standard Criteria for Taxes and Tax Systems
Standard Criteria for Taxes and Tax Systems
There are an unlimited number of possible designs for a state and local tax system. Of course, the federal and state constitutions, federal law, culture, history, economics, and politics act to constrain the practical choices. Still the possibilities are large in number and variety. How should the people of a state choose among the options? Public finance experts have identified a number of criteria on which to judge a tax system, chief among them are fairness, adequacy, simplicity, efficiency, and stability. These are not formulaic measures, rather a framework for examining alternatives. It is by the people in a democracy applying their own values, experiences and preferences to these criteria that the criteria can serve to support policy debates. Agreeing that fairness is important does not resolve the question of what is fair. Recognizing that a system should raise an adequate amount of revenue does not answer the question of what is adequate. Nonetheless these concepts can create a structure that makes meaningful debate easier.
No tax is perfect in all respects. One reason to depend on a variety of taxes is that the weaknesses of one type of tax may be counterbalanced by the strengths of others.
So, while the particular taxes making up a tax system will usually fall short when examined in light of some criteria, the overall tax system may do much better in satisfying many or all criteria.2
2 For more detailed discussions of these criteria see: C. Eugene Steuerle, Contemporary US Tax Policy, (Washington, DC: Urban Institute Press, 2004); The Encyclopedia of Taxation & Tax Policy (Washington DC, Urban Institute Press, 2005).
Table of Contents
- Standard Criteria for Taxes and Tax Systems
