Meaning of ABILITY-TO-PAY PRINCIPLE in English


A principle of taxation in which taxes are based on the income or resource-ownership ability of people to pay the tax. The income tax is one of the most common taxes that seeks to abide by the ability-to-pay principle. In theory, the income tax system is set up such that people with greater incomes pay more taxes. Proportional and progressive taxes follow this ability-to-pay principle, while regressive taxes, such as sales taxes and Social Security taxes, don't. The logic behind the ability-to-pay principle is that taxes are collected by the government to finance public goods that provide benefits to all members of society. And because taxes are a diversion of resources from the household to the government sector, it makes sense to tax, or divert income away from, the people who actually have the income.

Environmental economics English glossary.      Английский глоссарий экономики окружающей среды.