Ability to Pay

Description and Definition of Ability to Pay

Ability to Pay is a principle of taxation. Different taxpayers ability to pay differs vastly. Generally a taxpayer with less ability to pay pays less tax, because his/her amount of income (wages, interests, profits) and assets (houses, cars, stocks, savings accounts) are less than other taxpayers. Individuals who earn more income pay more tax, not because they use more government goods and services but because taxpayers who earn more have the ability to pay more. Our progressive tax, or higher tax rates for people with higher incomes, is based on this principle.

Resources

See Also

Further Reading

• Ability to Pay in the West's Tax Law Dictionary
• Ability to Pay in “A Dictionary of Taxation”