1. Principles of Taxation Gary Klass Pos 232

2. 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)

3. 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”)

4. Efficiency and Simplicity Cost of collecting taxes (toll roads vs. IPass) Cost of compliance

5. Visibility Taxes should not be hidden – those who bear the burden should be aware (Hidden taxes: Gross Receipts Tax, Lottery?)

6. Other principles Broad base (to allow lower rates) Predictable and stable supply of revenue Diverse sources (for stability and lower rates) Addresses geographic competition

9. TAX RATES

11. Revenues and Expenditures