Title: Ability-To-Pay Taxation Definition
Headings: Ability-To-Pay Taxation
Ability-To-Pay Taxation
What Is Ability-To-Pay Taxation?
Key Takeaways
Understanding the Ability-To-Pay Principle
History of Ability-to-Pay Taxation
Arguments for Progressive Taxation
Criticism of Ability-to-Pay Taxation
Progressive Taxation and Inequality

Content: To a person with earns $1 million a year, $10,000 will make very little difference in their life, while it will make a big difference to a person earning only $60,000 a year. History of Ability-to-Pay Taxation
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. Smith wrote: “ The subjects of every state ought to contribute toward the support of the government, as near as possible, in proportion to their respective abilities; that is in proportion to the revenue which they respectively enjoy under the protection of the state.” Arguments for Progressive Taxation
Advocates of ability-to-pay taxation argue that those who have benefitted most from the nation’s way of life in the form of higher incomes and greater wealth can afford and should be obligated to give back a little more to keep the system running. The argument is that the society that government tax revenue has helped build— infrastructure such as highways and fiberoptic communications networks, a strong military, public schools, a free market system—provide the environment in which their success is possible and in which they can continue to enjoy that success. Criticism of Ability-to-Pay Taxation
Critics of progressive taxation argue that it is fundamentally unfair. They say it penalizes hard work and success and reduces the incentive to make more money.