The first thing which must be recognized is that all forms of taxation have consequences for the ways in which people organize their economic activity and the ways in which the non-taxed part of the society's output is distributed across different portions of the population.  Taxpayers generally try to organize their affairs to minimize tax payments.  For ordinary working people this may involve driving to New Hampsh ire, shopping online, putting money in a 401K or working "under the table".  Landlords, business owners, investors and directors of multi-national corporations have much more ability to rearrange their activities to minimize taxes, and in addition, where the market permits, they will pass along the cost of the tax to their tenants as higher rents, to their customers as higher prices and to their workers as lower wages.  

 

A great deal of research has been done on the effects of various tax structures on levels of investment and economic activity, on which components of the population pay what proportion of their income on various taxes and who actually bears the cost of the taxes.  One very striking result of these studies is that landlords are generally able to pass nearly the entire amount of the real estate taxes they pay along to the tenants.  Another is that corporations under some circumstances can pass most of the corporate income tax along to customers.  The tax which is hardest to pass along to someone else is the income tax; the person who is taxed is the one who actually bears the cost of the tax.

 

One broad measure of who pays or bears the cost of a tax is its degree of "progressiveness" or "regressiveness", either in terms of who pays it or in terms of who bears the cost.  A progressive tax or tax structure is one where those with more income or wealth pay a higher proportion of their income or wealth in taxes, and a regressive tax is one where those with lower incomes pay a higher proportion of their income.   Again we need to distinguish between who pays the tax and who bears the cost.  Sales taxes are notoriously regressive because working people spend a larger proportion of their income; but excluding food from the tax makes it less regressive.   A tax on rental properties is nominally progressive because landlords on average have higher incomes than those who depend on wages, but if they are able to pass along the cost of the tax as higher rents it may in fact be a highly regressive tax.  

 

A "progressive income tax" is one where people with higher incomes pay a higher proportion of their income in taxes.  This can be done by exempthing the first part of people's incomes from taxes, by giving them tax credits or by setting higher rates for income above a certain amount.  Again one must look below the surface to see who is actually paying how much tax to know whether it is actually progressive, and a single word may not be enough to describe what one finds.  Armies of lobbyists have waged political battles for years to load the Federal income tax with loopholes, with the result that the tax code is a nightmare of complexity.  Currently somewhat-wealthy people do pay higher Federal income tax rates than working people, but the very wealthy pay almost no tax on their incomes.

 

Then there is the matter of who levies the tax: the city or town, the county (in other states), the state or the nation.  People and corporations cross borders to do business, invest, shop and even live.  The higher the tax differential the greater the incentive to take it into account.  The larger the geographic area of the political entity, the harder it is to do so. It is easier to shop in, invest in or move to the next town than to the next state; but for large corporations and the wealthy it is worthwhile to move to some other nation where tax rates are lower.  Some small nations with few other resources even specialize in providing "tax havens" for the wealthy.  The result is competitive pressure on towns, cities, states and even nations to keep tax rates low.

 

So what is the "right tax"?  That depends on who you are, what you value and whose interests you seek to represent.

 

This is a matter of intense political struggle, in which the wealthy have had the upper hand for the past sixty years, and it involves first the question of how much money we want our governments to have to do what with, and then which governmental bodies will raise this money and how they will distribute it.  Then there is the struggle over which individuals or groups will pay how much of the tax, and the struggle of different taxing districts for competitive advantage, which includes finding a balance between a level of social spending which will make the district an attractive and viable place to live or do business and a level of taxes that won't drive people or businesses away.  Finally there is the issue of the effects of taxes on investment and allocation of resources, overall and in terms of components and various social purposes, such as encouraging charitable giving, conservation or types of investment.

 

"Conservatives" tend to support taxes and tax structures which allow the wealthy and their corporations to retain as much of their income as possible, and to steer any "social engineering" uses of tax structures in directions that will result in large profits.  They tend to favor starving the parts of government that provide services to poor and working people, while funding parts such as the "defense budget" that support their profit-seeking activities at hoe and abroad.  

 

"Progressives" generally support tax structures that shift as much of the tax burden as possible from the working people to the wealthy - as a counter to the inherent tendency of a capitalist society to produce ever higher levels of inequality - and to use taxes to encourage activities and investments that will benefit the majority of the people.   This may involve some painful tradeoffs.  For example a gasoline tax or carbon tax which will give people an incentive to reduce the burning of fossil fuel seems to be absolutely necessary to save the planet, yet it is inherently regressive, since working people spend a higher proportion of their inco me on housing and transportation, while the wealthy are better able reduce their payment of this tax by buying a hybrid or "greening" their home.  These conflicts cannot be evaded or used as an excuse to do nothing. 

 

Both conservatives and progressives have to beware of setting any one tax so high that it "kills the golden goose".  (Or in present circumstances, so high that it prevents the revival of that golden goose or even bringing it back from the dead!)  Conservatives however are notorious for using scare tactics - even economic blackmail - to get their way, so claims about who will stop investing or working if a tax is raised need to be considered carefully..   

 

Just how much of which taxes by whom on whom we should be supporting is a big and ongoing subject, which involves both getting good facts and making both moral and practical judgments.  Probably our most powerful tool is the Federal Income Tax, reworked to make it much more progressive, coupled with much more aggressive measures to prevent the wealthy from moving themselves or their corporations offshore to avoid it.  Next would be a genuinely progressive state tax.  We urgently need a hefty carbon tax to prevent a climate apocalypse (that's the right word for what we may be setting in motion), unpopular as that may be, so ways must be found to offset its impact on working people's budgets and make it a popular demand.

 

One general principle however that everyone should recognize is that any tax will produce unforeseen consequences as people seek to minimize or evade their payment of it, so no one tax is going to be anyone's magic solution and a broad mix of taxes will probably always be needed.