In the textbook “Public Finance,” second edition author John E. Anderson methodically analyzes Efficiency and Equity Effects of Taxes and Subsidies. Beginning in Chapter 10 Structure of Taxes, Chapter 11 Efficiency Effects of Taxes and Subsidies, Chapter 12 Incentive Effects of Taxation, and Chapter Equity Aspects of Taxes and Expenditures. In the author, Anderson, Chapter 10 Structure of Taxes starts out by focusing on a foundational understanding of tax systems, how they are designed, and how best to evaluate whether they work the way we would like them to work. Anderson goes on to state that, “we have an innate concern that the tax system be fair and efficient. We want a system that treats people fairly. Roughly speaking, we want a tax system that taxes on the basis of ability to pay, (p.289).” Anderson goes on to explain that in order to understand how tax systems work one must be able to understand what is taxed. He defines the term tax base as, “the item or activity that is taxed, (p.292).” He gives three examples of tax base. The first example is income tax. Income tax is according to Anderson, “applied to certain forms of income such as wages but not to other forms of income such as interest earned from municipal bonds. The second example is sales tax. Sales tax is according to Anderson, “applied to certain transactions, like the purchase of a good, but not other transactions, like the purchase of a service, (p.292).” The third example is Value-Added Tax Base. Value-Added Tax Base according to Anderson is, “a tax applied to the difference between the value of a product at sale and the cost of the raw materials used in its production. Although VATs are not often used in the United States, they are a very common form of tax in the rest of the world, (p.300).” Places like Canada, Mexico, Russia, Australia, New Zealand, and most South American and European