What's the best way for a government to raise the revenues it needs to govern?

We often debate tax levels on Fluther, but there is much more to how we raise revenue than simply raising or lowering taxes. Revenue may come from any combination of import and export duties, value added taxes, a sales tax, excise (sin) taxes, capital gains taxes, estate taxes. Tax laws can be full of loopholes designed to benefit a select few, or they can apply to all in a given bracket equally. We can tax the daylights out of businesses and all pay in the form of higher prices since businesses have no choice but to pass the cost along in their price of goods. Or we could eliminate all corporate taxes, making it easier for our corporations to compete on an international stage, and raise revenues elsewhere. If we choose income taxes, then tax rates can be regressive or progressive. We can exclusively tax the poor to allow the rich to accumulate vast wealth while destroying the middle class, we can tax the rich out of existence destroying investment and job creation, or we can land anywhere in between those two absurd extremes.

If you scroll down a bit on this page you’ll find a chart of total government spending (local, state and federal) as a percentage of US Gross Domestic Product (GDP) from 1900 to today. Note that spending was at a recent low of 33% of GDP in 2000. The period from 1992 to 2000, with spending hovering between 35% and 33%, saw a sustained economic boom, the greatest job creation spurt since the 2nd World War, and the largest budget surplus in history. Two wars and an unfunded prescription drug benefit “paid for” by two successive tax cuts for the rich turned the budget surplus into a substantial deficit, which was massively compounded by the Great Recession of 2007 requiring heavy spending to rescue the economy and also collapsing GDP. Spending hit 42% of the recession-eviscerated GDP in 2009, and has dropped back to about 38% today.

For argument sake, let’s say that the 33% to 35% rate that was working in the 1990s is a sweet spot we should shoot for in good economic times. That may or may not be the right level of spending, but that is not the subject of this question. Some level is required for anything above a failed state, and whatever that level is, this question is about how best to pay for it.

So, the question is how do we raise necessary revenue in such a way we follow the Hippocratic Oath, “First, do no harm.”? What revenue sources help our society be all that it can be?