MANAGEMENT

Detailed explanation-1: -The idea of a progressive income tax-that is, that people with the ability to pay more should pay a higher percentage of their income-is centuries old. In fact, it was espoused by none other than Adam Smith, considered the father of economics, in 1776.

Detailed explanation-2: -The ability-to-pay theory forms the basis of the U.S. progressive tax system. That is, the rates of tax increase with the increase in income levels. The system works by segmenting income ranges in tax brackets, whereby each income range is assigned a particular rate.

Detailed explanation-3: -Definition: Progressive tax is the taxing mechanism in which the taxing authority charges more taxes as the income of the taxpayer increases. A higher tax is collected from the taxpayers who earn more and lower taxes from taxpayers earning less. The government uses a progressive tax mechanism.

Detailed explanation-4: -What Is Ability to Pay? Ability to pay is an economic principle that states 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.

Detailed explanation-5: -In taxation: The ability-to-pay principle. The ability-to-pay principle requires that the total tax burden will be distributed among individuals according to their capacity to bear it, taking into account all of the relevant personal characteristics.