The burden of the state borne by society is determined by the role and functions of the state. The burden of the state comprises (see diagram below):

1. The tax burden;
2. The level of government borrowing; and
3. The dilution of the value of money.

1. The tax burden is threefold:

1.1. The direct burden, or the one paid in taxes.
To lift the direct tax burden, or the level of tax rates, a budget reform should be adopted, aimed at the privatisation of government functions, expedient financing, and a balanced and transparent budget.

1.2. The indirect burden, which comprises the costs of tax compliance and administration.
If the indirect tax burden is to be reduced, the current tax system should be replaced, enacting simple and accurate procedures for tax computation and payment as well as automatic tax administration that would occur regardless of the administrator's will.

1.3. The hidden burden, or the impact of taxes on the economy, economic agents, and the allocation of resources.
For the hidden tax burden to be minimised, the economically most neutral tax system must be installed, a system that would do the least possible damage to economic activity and that would perform, not a regulating, but revenue-generating role.

2-3. Tax and budget reforms should be combined with the revision of government borrowing as well as monetary and banking policies. The dilution of the value of money and the use of loans in financing government functions should be outlawed, for their burden and redistributive potential are, not only cumbersome, but hidden from society. Since cash and non-cash money can be issued by both the central bank and commercial banks, adherence to a rule-bound issue of money and a hundred percent reserve requirement by commercial banks is equally essential. No loans should be taken on behalf of the state-neither domestically nor internationally-so that the burden of government spending would not be disbursed over generations.

If the burden of the state is to be reduced, changes must occur in attitudes to the role and functions of the state in economic affairs and social life. The curtailment of government powers and functions will lead to a steady decline in the cost of the state and unleash private sector opportunities. The adoption of the proposed reforms would provide conditions for a shift to a social order under which common needs will be financed and the needy supported on a voluntary basis.

(From LFMI's tax and budget reform proposal)