This paper discusses Guanzi’s philosophy regarding how the state should levy taxes. As Guanzi writes, people react individually to what they perceive as taxes, whereas government wants people not to react at all and simply pay the levies. Based on a philosophical analysis of human action, Guanzi suggests introducing a consumption tax on salt and iron. First, people have no way of evading them; second, because of the implicit character of the tax, people will not notice it. Therefore, these taxes will not influence behavior. This paper uses this discussion as a case study in order to show how Guanzi’s philosophy differs from other forms of Legalism. It will be shown that Guanzi is foremost a pragmatic thinker willing to use Confucian and Legalist elements, amalgamating them into policy-advice. The paper, however, does not discuss issues of Sinology as they relate to the text of the Guanzi, taking the text instead as a philosophical body.