ideal_tax_system - Goals of an Ideal Taxing System (based...

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Goals of an Ideal Taxing System (based on the 18 th century writings of Adam Smith The basic objective of taxation is to raise revenues to finance governments. Governments also attempt to achieve other objectives in designing and implementing tax systems. These objectives are frequently complicated by the dynamics of political, economic, and social forces. Since the writings of 18th-century economist Adam Smith, people designing and analyzing tax systems have often considered the criteria he identified – equality, certainty, convenience, and economy – when attempting to measure the fairness of the tax system. EQUALITY Equality means that taxpayers should bear a fair level of tax relative to their economic positions and their contribution to the support of the government should reflect their economic ability to pay. Equality can be defined in terms of two dimensions – horizontal equity and vertical equity. Horizontal equity means that two similarly situated taxpayers (as measured by the tax base) are taxed the same. Often this ignores other economic variables that affect a taxpayers’ ability to pay taxes. Every time Congress tries to capture these other economic variables in order to promote greater fairness in the tax code, the tax law grows
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This note was uploaded on 03/03/2010 for the course ACG 6845 taught by Professor Kelliher during the Spring '09 term at University of Central Florida.

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ideal_tax_system - Goals of an Ideal Taxing System (based...

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