64
MAKE TAXES
FAIR AND
EFFICIENT
THE TAX BURDEN
W
ho bears the burden of
tax? The key question
of “tax incidence”
intrigued the gifted economist
Anne-Robert-Jacques Turgot, who
was the French Minister of Finance
from 1774–76. The question is not
as simple as “who should pay tax?”
because taxes affect many things,from prices and profits to amounts
of goods consumed and incomes
received. Changes in these can
ripple through the economy in
surprising ways. The “burden” of
a tax—which is taken to mean a
decrease in happiness, welfare, or
money—can be shifted from one
person or group to another. If youTaxes
should...IN CONTEXT
FOCUS
Economic policyKEY THINKER
Anne-Robert-Jacques
Turgot (1727–81)BEFORE
1689–1763 Expensive wars,
together with an inefficient
tax system that exempted
landowners and unions, lays
the ground for French financial
crisis and the Revolution.AFTER
1817 In his Principles of
Political Economy and
Taxation, British economist
David Ricardo argues that
taxes should fall on luxuries.1927 British mathematician
Frank Ramsay emphasizes the
importance of price elasticity.1976 Economists Anthony
Atkinson and Joseph Stiglitz
suggest uniform commodity
taxes are optimal in The
Design of Tax Structure.They must fall
mainly on those
able to pay
the most.They must be
collected
effectively.They must
maximize
welfare while
raising sufficient
revenue.They must
distort markets
as little as
possible.Make taxes
fair and
efficient.... be
fair.... be
efficient.They must fall
equally
upon similar
people.They must fall
on those
most likely
to benefit.