Advertisement

Evaluating a Tax System and Related Measures

  • Aman KhanEmail author
Chapter

Abstract

To a large extent, the effectiveness of a government depends on how well it can provide public goods that will meet the demands of its citizens. However, for a government to be able to provide the goods consistent with public demands, it must be able to collect the necessary revenue, in particular tax revenue, without overburdening the taxpayers. The decisions to raise taxes that can realistically support the range of goods a government provides must be based on a sound understanding of the principles that underlie those decisions. The budget process expects the decision makers to have a basic understanding of these principles before making any decision on how much goods they must provide, the amount of revenue they must collect, the sources from which the revenues must come, and the economic and financial effects their decisions will have on the taxpayers vis-à-vis society at large. This chapter discusses several widely regarded principles that serve as the basis for making tax decisions in a government, known as “the desirable characteristics” of a tax structure. It also briefly looks at some of the methods frequently used in tax collection. A central issue in any discussion on taxation is not how much revenue a tax system generates, but who ultimately bears the tax burden, known as tax incidence. The chapter concludes with a brief overview of incidence of taxation, including some of the methods commonly used for measuring the incidence.

References

  1. AICPA. (1992). Guiding Principles of Good Tax Policy: A Framework for Evaluating Tax Proposals. https://www.aicpa.org/advocacy/tax/downloadabledocuments/tax-policy-concept-statement-no-1-global.pdf.
  2. Christensen, T., & Laegreid, P. (2003, March 15–18). Trust in Government—The Significance of Attitudes Towards Democracy, the Public Sector and Public Sector Reforms. Paper Presented at the 64th National Conference of the American Society for Public Administration (ASPA) on “The Power of Public Service,” Washington, DC.Google Scholar
  3. Daunton, M. (2001). Trusting Leviathan: The Politics of Taxation in Britain, 1799–1914. Cambridge, UK: Cambridge University Press.Google Scholar
  4. Deaton, A. (1997). Analysis of Household Surveys: A Microeconomic Approach to Development Policy. Baltimore, MD: Johns Hopkins University Press.CrossRefGoogle Scholar
  5. Deb, K., & Gupta, H. (2005). Searching for Robust Pareto-Optimal Solutions in Multi-objective Optimization. Proceedings of the Third Evolutionary Multi-criteria Optimization (EMO-05) Conference (Lecture Notes on Computer Science), 3410, 150–164.Google Scholar
  6. Feldstein. M. S. (1976, July–August). On the Theory of Tax Reform. Journal of Public Economics, 6, 77–104.CrossRefGoogle Scholar
  7. Government Accountability Office (GAO). (2008, March 13). Internal Revenue Service: Fiscal Year 2009 Budget Request and Interim Performance Results of IRS’s 2008 Tax Filing Season. Washington, DC: GAO-08-567.Google Scholar
  8. Hand, L. (1947, December). Thomas Walter Swan. Yale Law Journal, 57(2), 167–169.Google Scholar
  9. Harberger, A. C. (1974). The Incidence of the Corporate Income Tax. In A. C. Harberger (Ed.), Taxation and Welfare (pp. 132–162). Boston, MA: Little, Brown.Google Scholar
  10. Haveman, R. H. (1976). The Economics of the Public Sector. New York, NY: Wiley.Google Scholar
  11. Higgins, M. (2007). Concepts in Federal Taxation. Jersey City, NJ: Thomson-Southwestern.Google Scholar
  12. Holcombe, R. G. (2006). Public Sector Economics: The Role of Government in the American Economy. New York, NY: Prentice-Hall.Google Scholar
  13. Hyman, D. N. (2014). Public Finance: A Contemporary Application of Theory to Policy. New York, NY: Cengage Learning.Google Scholar
  14. Kaldor, N. (1939, September). Welfare Propositions of Economics and Interpersonal Comparisons of Utility. Economic Journal, 49, 549–552.CrossRefGoogle Scholar
  15. Laffer, A. (2004, June 1). The Laffer Curve: Past, Present, and Future. The Heritage Foundation. https://www.heritage.org/taxes/report/the-laffer-curve-past-present-and-future.
  16. Lipsey, R. G., & Lancaster, K. (1956–1957). The General Theory of the Second Best. Review of Economic Studies, 24, 11–32.Google Scholar
  17. McCreadie, K. (2009). Adam Smith’s the Wealth of Nations: A Modern-Day Interpretation of an Economic Classic. Oxford, UK: Infinite Ideas.Google Scholar
  18. Mikesell, J. L. (2014). Fiscal Administration: Analysis and Applications for the Public Sector. New York, NY: Wadsworth.Google Scholar
  19. Pechman, J. A. (1985). Who Paid the Taxes: 1966–1985? Washington, DC: The Brookings Institution.Google Scholar
  20. Putnam, R. D. (1995, January). Bowling Alone: America’s Declining Social Capital. Journal of Democracy, 6(1), 65–78.CrossRefGoogle Scholar
  21. Stiglitz, J. E. (2000). Economics of the Public Sector (pp. 456–468). New York: W. W. Norton.Google Scholar
  22. Stiglitz, J. E., & Rosengard, J. K. (2015). Economics of the Public Sector (pp. 606–635). New York: W. W. Norton.Google Scholar
  23. Theil, H. (1967). Economics and Information Theory. Amsterdam: North Holland.Google Scholar
  24. Yang, C. W., & Stitt, K. R. (1995, January). The Ramsey Rule Revisited. Southern Economic Journal, 61(3), 767–774.Google Scholar

Copyright information

© The Author(s) 2019

Authors and Affiliations

  1. 1.Department of Political ScienceTexas Tech UniversityLubbockUSA

Personalised recommendations