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ability to pay

A Dictionary of Business and Management | 2006 | 397 words | Copyright

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 levied on the higher slices. A typical progressive tax of this sort is UK income tax. Compare benefit taxation; flat tax; regressive tax.

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