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The principles of taxation

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Answer the following question in your own words without quoting anyone:

In your own words, discuss the taxation principles and relate them to tax
incidence. Define the key terms as you go.

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Solution Summary

The four principles of taxation and how they relate to tax incidence.

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The principles of taxation include the concepts of equity, efficiency, adequacy, and affordability. Equity requires that the government levy taxes on those who benefit from the services provided by them, and only on those with the ability to pay. It often requires a progressive taxation structure. Efficient taxes are those that are put to good use- a system that costs a great deal to administer would not be efficient. Adequate taxation implies that income generated from taxation is sufficient for the government's needs. Affordability requires that the taxes do not impose an undue burden on the public.

Tax incidence describes how the burden of a tax is distributed between buyers and sellers. It depends strongly on the elasticity of the demand curve, which measures how changes ...

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