Ability To Pay
An economic principle stating that the amount of tax an individual pays should be dependent on the level of burden the tax will create relative to the wealth of the individual. The ability to pay principle suggests that the real amount of tax paid is not the only factor that has to be considered, and that other issues such as ability to pay should also factor into a tax system.
The application of this principle is a progressive tax system, in which individuals with higher incomes are asked to pay more tax than individuals with lower incomes. Classical economists like Adam Smith believed any elements of socialism, such as a progressive tax, would destroy the initiative of the population within a free market economy. However, many countries have blended capitalism and socialism with a great degree of success.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
ability-to-pay — noun The principle that taxes should vary according to an individuals level of wealth or income. Progressive taxes attempt to reduce the tax burden of people with a lower ability to pay. Syn: well being, utility, welfare … Wiktionary
ability-to-pay — The principle that taxes should be levied on the basis of the taxpayer s ability to pay. This normally leads to the view that as income or wealth increases, its marginal utility (its value to its owner) decreases, so that higher rates of tax can… … Accounting dictionary
ability to pay — The principle that taxes should be levied on the basis of taxpayers ability to pay. This normally leads to the view that as income or wealth increases, its marginal utility (its value to its owner) decreases so that higher rates of tax can be… … Big dictionary of business and management
ability to pay — capacity to pay, having the necessary resources to pay; principle that wealthier people who can afford to pay higher taxes ought to be required to do so (Economics) … English contemporary dictionary
ability to pay — Refers to the borrower s ability to make interest and principal payments on debts. Bloomberg Financial Dictionary See: fixed charge coverage ratio. Bloomberg Financial Dictionary In context of municipal bonds, refers to the issuer s present and… … Financial and business terms
ability-to-pay principle — ➔ principle … Financial and business terms
ability to pay principle — UK US noun [S] ► TAX, ECONOMICS the principle that people should pay tax according to how much money they earn … Financial and business terms
Ability-to-pay-Principle — [ə bɪləti tə peɪ prɪnsəpl, englisch] das, Grundsatz für die Verteilung der Steuerlast (Leistungsfähigkeitsprinzip) … Universal-Lexikon
Ability-To-Pay Taxation — Taxation in the form of a progressive tax. The ability to pay principle in taxation maintains that taxes should be levied according a taxpayer s ability to pay. This progressive taxation approach places an increased tax burden on individuals,… … Investment dictionary
ability to pay debts — See able to pay; insolvency … Ballentine's law dictionary