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The fundamental purpose of taxation is to raise the revenue necessary to fund public services. While there are many ways to achieve this goal, a widely agreed-upon set of principles should be used to evaluate tax systems. This policy brief provides a basic overview of five commonly cited principles of sound tax policy: equity, adequacy, simplicity, exportability, and neutrality.

Almost without exception, state lawmakers do not closely scrutinize special tax credits, exemptions, and other “tax expenditures” on a regular basis. A recent report by the Pew Center on the States found, for example, that half the states have done nothing even remotely rigorous in the last five years to determine if even a single one of their economic development tax incentives is working.

The tax systems of virtually every state are pushing poor families deeper into poverty. But state tax systems also have the potential to play a role in fighting poverty. The four low-income tax credits discussed in this report are among the most cost-effective anti-poverty strategies available to lawmakers: the Earned Income Tax Credit, property tax circuit breakers, targeted low-income tax credits, and child-related tax credits. This report identifies the states in which each of these credits is offered, and provides specific recommendations tailored to policymakers in each state as they work to combat poverty.

One of the thorniest problems in administering state corporate income taxes is how to distribute the profits of multi-state corporations among the states in which they operate. Ultimately, each corporation’s profits should be taxed in their entirety, but some corporations pay no tax at all on a portion of their profits. This problem has emerged, in part, due to recent state efforts to manipulate the “apportionment rules” that distribute such profits. This policy brief explains how apportionment rules work and assesses the effectiveness of special apportionment rules such as “single sales factor” as economic development tools.

For much of the last century, estate and inheritance taxes have played an important role in helping states to adequately fund public services in a way that exempts middle- and low income taxpayers.

As the nation’s governors gather in Williamsburg, Virginia this week, their focus is on their Chairman’s initiative, Growing State Economies. Too often, however, a governor’s knee-jerk response to a lagging economy is to start cutting taxes, even though state tax cuts offer a demonstrably low economic bang-for-the-buck, for a number of reasons.

A few vocal critics have pointed to state personal income taxes as the source of a variety of fiscal and economic problems- arguing that it has enabled wasteful spending, fueled the volatility of revenue collections, or even stifled job-creation. Accordingly, some of these critics have called for the outright repeal of the income tax, while others have suggested making it significantly less progressive. Such proposals, if acted upon, would make it all but impossible for state tax systems to produce revenue in a fair and sustainable fashion.

Sales taxes are among the most important–and most unfair–taxes levied by state governments. Sales taxes accounted for a third of state taxes in 2011, but sales taxes are regressive, falling far more heavily on low- and middle- income taxpayers than on the wealthy. In recent years, lawmakers thinking they might lessen the impact of these taxes have enacted “sales tax holidays” that provide temporary sales tax breaks for purchases of clothing, computers, and other items. This policy brief looks at sales tax holidays as a tax reduction device.