One reason that governments impose taxes is to finance the services that citizens demand. This study examines how governments can extract tax revenues in the least costly and economically damaging manner. There are, of course, other policy considerations in determining tax policy. Indeed equity (often referred to as fairness) and simplicity are critical policy factors. That acknowledged, this study focuses on economic efficiency, which is frequently ignored in public policy discussions about tax policy. The reason to focus on economic efficiency is because not all taxes are created equal; the economic costs of different taxes are different. Some taxes impose greater costs on society than others. The key for societies is to rely more on the less costly taxes and less on the more costly taxes.