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Will Tax Negotiations Flow from Principles of Sound Taxation?

Posted By Alexandra Sirota On June 21, 2013 @ 2:11 pm In NC Budget and Tax Center | Comments Disabled

As the House and Senate negotiate their tax plans, it is important that the offers and counter-offers put forward align with the principles of sound taxation. The answers to practical questions about taxes – like how high or low should they be, who should pay how much, what should be taxed – truly should flow from rock-solid principles based on the best available research and evidence.

Here are a few principles that policymakers should keep in mind this weekend:

  • A tax system needs to pay for services needed to promote economic growth, public safety and many other important functions. Both short- and long-term adequacy are critical.
  • Equity needs to be built in. That means, for example, that lower income households don’t pay a higher share of their income in taxes than do high income households; and that people in similar economic situations pay roughly similar taxes.
  • A tax system needs to be constructed in ways that avoid, to the extent possible, unpredictable, large fluctuations in the amount of revenue collected in a given year.
  • The amount of revenue collected should increase as the economy expands, reflecting the increased needs for education, transportation and many other services.

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