ABSTRACT
Ever since the economist Adam Smith specified the role for limited government interference in a market economy, most Conservative economists have recognized the need for a small public sector. However, the government sector in most advanced capitalist societies has expanded well beyond what Smith ever expected. To Smith, the state should provide for the national defense; educate citizens; administer justice; pay for "public works and institutions for facilitating the commerce of society"; sustain the indigent, old, and infirm; and "support the dignity of the sovereign." Furthermore, government should pay for its provision and administration of goods and services by imposing taxes in an equitable and consistent manner. Thus, the overall goal of government tax policy should be to (l) devise a system that is fair to all citizens and (2) help stimulate market forces that promote growth and capital formation.
