Tax theory

Tax theory explores the principles behind how governments design and implement taxes. It considers what makes a tax fair, efficient, and effective, balancing revenue needs with economic and social impacts. Key ideas include fairness (such as ability to pay), simplicity, and minimizing negative effects on economic growth. Economists analyze who bears the tax burden—whether it's the people who pay directly or indirectly—and how taxes influence work, investment, and consumption. Overall, tax theory helps policymakers create systems that fund public services while promoting a stable and fair economy.