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There are two main ways for governments to collect taxes. One is by taxing income directly. This is known as an income tax. The other is taxing only income that is spent.

Tax reform should focus on raising sufficient revenue. It should make the tax system more equitable and efficient.

Reforms should

States should increase the progressive nature of their income tax systems.

Reforming business taxes, such as the corporate tax or a tax on the financial industry, should be considered in any effort to raise additional revenue.

States with income taxes should allow credits for taxes paid by their residents to other states so that no taxpayer is subject to double taxation.

Currently, some types of income are either taxed at lower rates than ordinary income or are exempt from taxation to some degree.

In general, only cash income is subject to the income tax. In-kind benefits—benefits that are received as goods or services rather than as cash—are not.

Policymakers should not tax the actuarial value of Medicare or the value of other in-kind benefits (see also

Limitations on the exclusions for other employer-provided benefits—such as life insurance, tuition, and parking—are a desirable method of broadening the tax base and making

Eligibility for the exclusion for employer-provided health insurance should be determined based on the employer’s coverage rules.