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Economics 101: Ability-to-Pay Principle | SterlingTerrell.net

Economics 101: Ability-to-Pay Principle


What is defined as the ability-to-pay principle?

The Ability-to-Pay Principle is a principle that says that taxes should be taxed based on the ability to endure the burden.

A 70% income tax rate on incomes under the poverty line would obviously violate the ability-to-pay principle. Too much income tax, on too little income.

On the other hand, a progressive income tax rate, where higher taxes are paid on higher and higher amounts of income would follow the ability-to-pay principle.