ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A citizen will pay more tax if he or she is able to pay more.
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citizens who will benefit from the use of the tax will pay for it
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Either A or B
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None of the above
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Detailed explanation-1: -The ability-to-pay principle holds that those who have a greater ability to pay taxes-measured by income and wealth-should pay more. One idea behind “ability to pay” is that those who have enjoyed success should be willing to give back a little more to the society that helped make that success possible.
Detailed explanation-2: -Direct taxes are imposed on the basis of individuals ability to pay principle, which says that those individuals or entities having access to more resources and earning a higher income need to pay higher taxes.
Detailed explanation-3: -The ability to pay principle is the basis of a progressive tax. Under this system, the tax rate increases with the wealth or income of the taxpayer. For example, for income less than $10.000, taxpayers must pay a rate of 10%. Meanwhile, for income less than $50.000 but more than $10.000, the tariff is 15%.