In this chapter we will consider the economic effects of different kinds of taxes and of various rules of taxation. First we consider how the behavior of individuals may be affected by a death tax such as the federal estate tax. We analyze the effection private savings of changes in social security benefits, and of a proposal to replace income tax with a tax on consumption. We also examine the effect of changes in tax rules on the level of charitable giving. We analyze the economic effect of rules allowing firms to deduct from taxable income the decline in value of their machinery and equipment through depreciation. Finally, we examine the social cost of two tax preferences, the allowance of percentage depletion for minerals such as oil and gas, and the exemption from income tax of interest on municipal bonds. Before we turn to the taxonomy, as it were, of federal tax rules, it is important to understand the impact of a tax in general terms. The reader may therefore wish to review the explanations of a tax and subsidy in the chapter on the principles of microeconomics, at the beginning of this text.