principles of a fair tax system

principles of a fair tax system

According to William Gale, a US advocate of tax reform, the principles of tax reform should be as follows:


The tax system should be comprehensible by the average taxpayer. An average taxpayer should be capable of filing their own taxes without the aid of a specialist.

[+] Position: Simplicity may be conflict with other objectives


One of the most historic debates is whether it is more fair to have a
  • flat tax system - all taxpayers pay the same % of their income.
  • progressive income tax - wherein wealthier taxpayers pay an increasing marginal tax rate (increase in %) over higher income brackets.

[+] Position: Fair is when everyone pays 20 percent!

Conducive to future prosperity.

Future well-being
Another way of saying this is that fiscal policy should be aligned with the long term objectives for social policy and environmental policy.
Tax fairness for future generations
Fiscal policy that increases or decreases government debt amounts to what are called intergenerational transfers - forcing the young to pay tax increases for services like health case which are mainly used by the old, is a transfer in one direction, while tax increases for education tend to go the other way.

Generate Sufficient revenue to pay for government expenditure.

Notwithstanding a cyclic debt/deficit question, this condition is fairly trivial. What is obviously more difficult is determining the optimum level of government expenditure. Advocates for big government and small government have different views on how much public spending there should be and how big the public sector should be relative to the economy.

Respect people's freedom and privacy.

Since almost all countries treat tax returns as confidential, this criteria is more an administrative issue than a public policy issue. In 2007 the Harper government legislated a Taxpayers Bill of Rightsregarding the "fair play" of tax officials in dealing with individual cases.