Systems of business and personal taxation in most Western economies are not efficient. The paper discusses efficiency losses due to (1) tariffs and sales taxes; (2) the nonneutral treatment of business durable inputs; (3) differential rates of business income taxation; and (4) the taxation of interest. Estimates of the possible magnitudes of the various efficiency losses are derived. The second part of the paper outlines the elements of an efficient system of taxation. A feature of the proposed system is that most workers would not have to file tax returns.