Taxes, Economics Of

The vision of sound taxes as the foundation of a wellregulated republic goes back at least to the revolutionary Dutch state of the 1790s. Policy makers over the years have sought to balance general goals of good taxation—efficiency, fairness, and low administrative (or transaction) costs—against the desire to use taxes to promote various social goals, including redistributing wealth, subsidizing particular industries, and rewarding or punishing particular behaviors. Economists have been in the forefront of the positive analysis of and normative debates about taxes, perhaps because the subject so readily lends itself to quantification and quantitative analysis. A rich public finance literature exists, so extensive as to defy comprehensive summarization. Instead, the focus here will be several important issues involving the economics of taxes.