Taxes: What You Need to Know

Taxes are deeply embedded in the fabric of the American economy and society. They create incentives related to work, saving, investment, borrowing, and marriage. They are key tools for the provision of the safety net and the redistribution of resources. And, certainly, not least, they finance government spending. At some level, the goals of tax policy command widespread support: raise the revenues needed to finance the government as simply, as equitably, and in as growth-friendly a manner as possible. However, the goals often conflict with one another – equity and growth, in particular. In addition, people often disagree on what the goals mean, how to make tradeoffs among the goals, and the best way to achieve any particular objective. As a result, taxes remain a perennial source of controversy among researchers, policymakers, and the public, involving both subjective and objective considerations.