The most commonly cited principles in tax policy are adequacy, equity, exportability, neutrality, and simplicity. There are also many tax revenue systems: excise, permit/toll, income, personal property, real estate, and sales.
Principles
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Adequacy
An adequate tax system raises enough money to pay for public services requested by citizens and policy makers. An inadequate system runs deficits; some state constitutions prohibit deficit budgets (that is, planning to run in the red).
What are the factors that contribute to a revenue source that provides adequate funds? The first is stability -- a predictable source of revenue. The second is elasticity, an economic concept. If a tax is elastic, it will grow faster than the economy. Unfortunately, this also means that if the economy is contracting, the tax base will contract more quickly, putting pressure on revenue at an inconvenient moment.
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Equity
When someone says that taxes should be "fair", then the underlying concept is equity. There are two measures of equity -- horizontal and vertical.
In a system that is horizontally equitable, persons or businesses in similar circumstances will have similar tax burdens. Taxes that affect one group (such as wage-earners) more harshly than another (such as investors) are not equitable. Income tax is an example of this disparity.
When someone is arguing that a tax is progressive or regressive, then the underlying concept is vertical equity. Regressive taxes require lower-income families to pay a greater percentage of their income in tax than upper-income families. The classic regressive tax is a sales tax; this is why some states exclude food and clothing from sales tax. Progressive taxes require upper-income families to pay a larger share of their income in taxes than lower-income families. The classic progressive tax is income tax. Flat or proportional taxes assess each taxpayer equally. As a general statement, regressive taxes are considered "bad."
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Exportability
Taxes that are exportable generate a revenue stream from non-residents (individuals or businesses) who enjoy public services provided by state and local taxes. One tax that falls into this category is sales taxes paid by tourists; this is also the rationale for supplemental taxes on hotel rooms and rental cars.
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Neutrality
Neutrality is an important economic concept; taxes that are neutral (or efficient) do not affect economic decisions. This is one of the arguments used by those who wish to impose sales tax on e-commerce -- so that the decision to buy a product is not affected by the higher price imposed by a sales tax.
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Simplicity
Simplicity may be the most important concept. The tax collection and assessment systems must not impose costs greater than the revenue raised. Moreover, a tax that has lots of loopholes (federal income tax) is the antithesis of a simple system.
