Economic Theory of Taxation

The Economic Theory of Taxation explores how taxes impact economic behavior and efficiency. It posits that taxes influence individuals and businesses by affecting their incentives to work, save, and invest. The goal is to design taxes that generate revenue with minimal distortion of economic activity. Economists analyze how different tax types and rates can lead to unintended consequences, such as reduced productivity or increased inequality. Ultimately, the theory seeks a balance where taxes fund public services without significantly hindering economic growth or fairness.