Principles of Tax Policy: Ability to Pay, Benefit Received, and Equity Considerations
Overview
This paper examines fundamental principles of tax policy including the ability to pay principle and benefit received principle. It analyzes how the United States applies progressive taxation based on income levels and explores concepts of vertical and horizontal equity in tax distribution.
What this coursework covers
- Ability to Pay Principle - examination of how tax burden correlates with individual wealth and income
- Benefit Received Principle - analysis of consumption taxes and the relationship between services received and taxation
- Equity in Taxation - discussion of vertical equity and horizontal equity in ensuring fair tax treatment across income levels
- Individual Income Tax Revenue - statistical overview of IRS revenue collection from individuals versus corporate entities
Preview
Tax Policy with Professor Fisher
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Tax Policy with Professor Fisher
The ability to pay principle states that the idea of the burden of the tax should be geared directly to one’s wealth and income. The United States has applied this principle where it states that the businesses and the individuals who have more substantial incomes are supposed to pay more tax relatively and absolutely than those with the income, which is more modest. The principle deals with the income tax because it does not make any connection between the payment and the use, but it states that the person who can bear the burden can pay the tax.
The benefit received principle of taxation state that the businesses and the household should purchase the services and the good of the government in the same way as other commodities are bought. The benefit of the products or services which are received by the individual should pay the tax, which is necessary for the supply of the services or the goods. The principle deals with the consumption taxes because the finances of highway construction and repair are tropically remarkable for gasoline taxes.
Vertical equity deals with the concerns of the redistribution of the income within the society, while Horizontal equity says that we gave the same treatment to people who earn more and those who learn less. It makes sure that no one is discriminated against.
The IRS raises more money from the individual income tax.