Tax incomes represent about 82,5 percent of State income. About 14 percent of that comes from income tax and about 75,5 percent comes from home tax on goods and services. Income tax is a taxation of individual's income and is considered to be a basic method of taxation of individuals. It is a direct tax, that considers taxpayer's personal circumstances and therefore represents a subjective way of taxation. Individuals pay income tax from all their income earned in a tax year. Slovenia employes a progressive income tax system in which higher income earners pay higher tax rate. The other tax is a home tax on goods and services. Most important representatives of that tax are value added tax and excise tax. In this thesis the focus will be on value added tax, which is said to be a modern way of consumption taxation. Its best qualities are its objectiveness (it does not consider individual's personal cricumstances) and its neutrality (it considers all incomes equally). At the same time this tax does not have an impact on someones desire to work extra hours and with that earn extra money, like progressive taxation of income does. With the help of economic analysis I will analize both taxes. Focusing on their effectiveness from the perspective of Laffer's curve and Smith'/Wagner's taxation principles.