1. Criteria for Effective Taxes
Equity- Make as fair as possible
Simplicity- Everyone can understand
Efficiency- Easy to administer and generates revenue

2. Principles of Taxation
Benefit principle of taxation- those who benefit more from spending of tax dollars should pay more for the taxes

3. Ability to Pay
Those that can best afford to pay taxes pay more taxes

4. Progressive Taxes
Tax that takes a larger percentage of higher incomes and smaller percentage of lower incomes
EX: Federal Income Tax

5. Regressive Taxes
Tax that takes a larger percentage of lower incomes and smaller percentage of higher incomes
EX: Sales Tax

6. Proportional Taxes
Tax that takes the same percentage of income from all taxpayers
Ex: Income Tax Percentage if set at 20%.

7. Tax Incidence
Group on whom the tax burden actually falls

8. Direct Taxes Tax levied and paid by an individual taxpayer
EX: Personal income tax

9. Indirect Taxes Tax that can be shifted from one person to another
EX: Property tax for landlords, businesses
Ease of shifting tax depends on how bad consumers want product (Inelastic Demand)