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Example, in the United States in 2010, a tax rate of 10% applied to incomes between $0 - $8,375; the tax rate increased incrementally up to 35% for those whose incomes were $373,651 or greater (these figures are based on single filers). Critics of ability-to-pay taxation state that the progressive tax reduces the incentive to earn more money, and penalizes those whose hard work and ingenuity have helped them earn higher incomes.
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Are the two principles of taxation the benefit principle and the ability-to-pay principle?
true
What are the two principles of taxation?
The two principles of taxation are benefit principle and the ability-to-pay principle.
What are the two principles used to assess fairness of a tax?
Benefits principle and Ability to pay principle.
What are the basic principles of taxation?
Principles and Theories of Taxation 1. The Benefit Principle- This principle holds the individuals should be taxed in proportion to the benefits they receive from the governments and that taxes should be paid by those people who receive the direct benefit of the government programs and projects out of the taxes paid. 2. The Ability to Pay Principle- This principle holds that taxes should relate with the people's income or the ability to pay, that is, people with greater income or wealth and can afford to pay more taxes should be taxed at a higher rate than people with less wealth. An example is Individual income tax. 3. Taxation The Equal Distribution Principle- This principle states that income, wealth, and transaction should be taxed at a fixed percentage; that is, people who earn more and buy more should pay more taxes, but will not pay a higher rate of taxes.
What is the ability to pay principle of taxation?
Benefit taxation can relate only to the financing of public services and not to the redistributive function of the tax transfer process.Under this approach, the tax problem is viewed by itself, independent of the expenditure determination.Horizontal EquityTaxationaccording to ability to pay calls for people with equal capacity to pay the sameVertical EquityFor people with greater ability to pay, they pay more. Person A , whose income is higher , should pay more than B. Implementation of either rule requires a quantitative measure of ability to pay . Ideally this measure is reflected in income, expenditure and wealth.
