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Ability to Pay Tax

Definition - What does Ability to Pay Tax mean?

Ability to pay tax can be defined as the amount of tax assessed by the authority based upon the individual’s (taxpayer) ability to pay. People who are against this tax system debate that the tax is actually a punishment for financial success while those in favor say that it provides relief to people who can’t afford to pay their taxes.

Justipedia explains Ability to Pay Tax

This can be explained further with an example. Suppose Person A makes $40,000 per year and Person B makes $90,000 per year. The government, while having to collect taxes to pay off its debt and being lenient on people who are not making that much money, decides to impose a tax rule where people with over $75,000 of income pay more taxes then people making less than $75,000. Person A would not pay as much of a tax as Person B.

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