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1 William McBride, How to Judge a Tax Plan 1 (2011)

handle is hein.taxfoundation/ffcigxz0001 and id is 1 raw text is: December 15, 2011 No. 286 How to Judge a Tax Plan By William McBride Tax reform has become the central issue in the presidential primaries and will likely remain an important issue in the general election. While the plans and proposals will vary considerably in their scope and intent, it is important that they all be judged against a standard set of guideposts or principles that define a sound tax system. The ideal tax system should do only one thing: raise a sufficient amount of revenue to fund government activities with the least amount of harm to the economy. By all accounts, the U.S. tax system is far from that ideal. Since 1937, Tax Foundation economists have judged every tax measure against the immutable principles of economically sound tax policy, which say that: Taxes should be neutral to economic decision-making; they should be simple, transparent, and stable; and they should promote economic growth.' From these principles, we have developed 10 basic questions to judge the economic quality of any tax plan or proposal. These questions cover four basic areas: * The fairness and neutrality of a tax system; * The complexity of a system and how costly it is to comply with it; * How the system affects U.S. competitiveness and economic growth; and * How it affects the stability or volatility of tax revenues. The largest group of questions deals with fairness and neutrality, since this aspect of our current tax code is widely perceived, perhaps correctly, as the code's most egregious failing. Likewise, complexity and compliance costs are a clear and present annoyance for millions of taxpayers. The remaining questions deal with the momentous and related problems of anemic economic growth and low tax revenues, and illustrate how they too can be blamed, at least in part, on our current tax code. William McBride is an economist at the Tax Foundation. 1 See, for example, Adam Smith's formulation in The Wealth of Nations, that taxes should a) be in proportion to income, b) remain stable, and c) minimize compliance costs and distortions of economic behavior. http://wweconib.or/bray/Smith/smWN21 .html#B.V, Ch.2. Of the Soui'ces of the General or P ublic Revenue of the Socieci

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