ABSTRACT
This chapter begins by providing a broad overview of taxation, placing it in a theoretical and comparative perspective. It turns to examine how the composition of revenues in the United States has changed over time. The most important change in the 20th century was the introduction of the income tax and its transformation during World War II from an elite tax to a highly progressive mass-based tax. The income tax was stripped of much of its progressivity in the 1980s. The corporate income tax declined dramatically in its generation of revenues while the payroll tax grew in importance. The chapter then examines tax expenditures—the deductions, exemptions, exclusions, and credits—that deliver benefits via the tax system. It concludes with a discussion of tax policymaking and the limits imposed by the budget reconciliation process, which has been the vehicle of choice for tax policy change in recent decades.
