One of the basic trade-offs inherent in designing a tax system is between:

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The basic trade-off in designing a tax system is between efficiency and equity. Efficiency refers to the ability of the tax system to allocate resources in a way that maximizes social welfare, while equity pertains to the distribution of the tax burden among taxpayers in a fair and just manner. Balancing these two objectives is difficult, as a tax system that is highly efficient may not be equitable, and vice versa. Therefore, policymakers must strike a balance between these goals to create a tax system that is both efficient and fair.

One of the Basic Trade-Offs Inherent in Designing a Tax