ability-to-pay principle of taxation
ability-to-pay principle of taxationthe principle that TAXATION should be based on the financial standing of the individual. Thus, persons with high income are more readily placed to pay large amounts of tax than people on low incomes. In practice, the ability-to-pay approach has been adopted by most countries as the basis of their taxation systems (see PROGRESSIVE TAXATION). Unlike the BENEFITS-RECEIVED PRINCIPLE OF TAXATION, the ability-to-pay approach is compatible with most governments’ desire to redistribute income from high income earners to low income earners. See REDISTRIBUTION-OF INCOME-PRINCIPLE OF TAXATION, POVERTY.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005