Ability to Pay Taxation
Ability to Pay Taxation: Fair or Flawed?
With concepts and ideas there is always a dichotomy of understanding and results. With the concept known as the Ability to Pay Taxation it is no different. Essentially the theory is this, the Ability to Pay creates a different tax rate for everyone based on their ability to pay the taxes. So, the poor would pay less in percentages of taxes and the rich would pay more. In theory this sounds like it is a fair concept. The idea is that the rich have more of an ability to pay taxes than the poor do making their contribution to government coffers increase each time their income amounts increase.
With increasing support from the growing population of the poor, politicians promise to get what they refer to as a ‘fair share’ from corporations and small businesses. So taxes increase exponentially based upon the success of an individual or his company. What many fail to comprehend is the fact that when discussing corporate taxation that corporations pass along the increasing amounts they pay in taxes to the end user so that they can recoup the loss in revenues.
This end user often ends up being the ‘poor’ that these tax increases are meant to appease. In truth, even if the tax rate was at a 90% level, those increases would be passed down to the poor consumers in the form of higher prices. What was once a $2.00 loaf of bread must now increase to $3 or $4.00 to compensate for the loss as a result of increased taxes.
In truth, an increase in tax rates on corporations and the wealthy does little to improve the lifestyles and benefits to the poor and more to increase a politicians’ power in the government. Add to the ability to pay taxation an increasing demand for government funds to house, feed and clothe the poor and soon the small business owners are faced with operating their business at a consistent loss each year just to pay the tax bill.
This type of progressivism over an extended period of time leads to economic hardships as businesses shut their doors rather than stay open for the seemingly sole purpose of keeping the government in cash.
- Debt ratios
- Liquidity ratios
- Profitability ratios
- Asset management ratios
- Cash Flow Indicator Ratios
- Market value ratios
- Financial analysis
- Business Terms
- Financial education
- International Financial Reporting Standards (EU)
- IFRS Interpretations (EU)
- Financial software
Most WantedFinancial Terms
- Most Important Financial Ratios
- Debt-to-Equity Ratio
- Financial Leverage
- Current Ratio
- Interest Coverage Ratio (ICR)
- Solvency Ratio
- Break-even Point
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