what is ability to pay taxation 
the ability to pay philosophy of taxation maintains that taxes should be levied according to a taxpayer s ability to pay underlying this is the idea is that people businesses and corporations with higher incomes can and should pay more in taxes the ability to pay principle is also known as progressive taxation understanding the ability to pay principleability to pay taxation argues that those who earn higher incomes should pay a greater percentage of those incomes in taxes compared with those who earn less for example in 2023 individuals in the united states with taxable income less than 11 000 faced a 10 income tax rate while those with taxable income of more than 578 126 faced a rate of 37 the nation s top individual rate earnings between those amounts face tax rates as set by income brackets the idea underlying ability to pay taxation is that everyone should make an equal sacrifice in paying taxes and because people with more money effectively have less use for a given dollar paying more of them in taxes does not impose a greater burden think of it this way 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 taxationthe 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 once espoused by none other than adam smith himself 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 ability to pay pros and consadvocates 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 fiberoptic communications networks a strong military public schools a free market system provide the environment in which their success was made possible and in which they can continue to enjoy success critics of progressive taxation argue that it is fundamentally unfair they say it penalizes hard work and success and it reduces the incentive to make more money many argue that everyone should pay the same income tax rate also known as a flat tax to make the system more equitable progressive taxation and inequalitywhile the u s still maintains a progressive tax system tax rates for the rich have plummeted over the past several decades when president ronald reagan took office in 1981 the highest income tax bracket for individuals was 70 in 2020 the top rate for incomes is 37 meanwhile inequality has reached levels not seen in at least a century the top 1 now holds more wealth than the bottom 90 