The Fundamental Principle Behind The Evaluation Of Tax Policy As Described By Economists George Break And Joseph Pechman
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The fundamental principle behind the evaluation of tax policy as described by Economists George Break and Joseph Pechman is the following: “The primary goal of taxation is to transfer control of resources from one group in a society to another and to do so in ways that do not jeopardize, and may even facilitate, the attainment if other economic goals” (Mikesell, 2010, p. 343). This means tax policy is about minimizing economic or social harm – a damage control. Therefore, as public servants we must thoroughly evaluate any changes to tax policy and let the criteria guide our decisions. The tax evaluation standards that most economists agree on are the following: equity, efficiency, adequacy/elasticity/stability, collectability, and political effects or transparency.
Tax Evaluation Criteria
There are two general standards to determine tax equity: benefits received principle (BR) and ability to pay principle (ATP). The BR principle would describe an equitable tax system as taxpayers contribute according to the benefits they receive from the public service (p. 350). Simply put, you benefit, you pay. This approach is unfeasible in the general tax system and is likely to make income distribution worse; therefore, this standard is less commonly used. The ATP principle would describe an equitable tax system as taxpayers contribute according to their ability to pay (p. 351-352). In other words, the more money you make, the more taxes you pay. This is