Explain the benefits-received principle of taxation. Give an example of a tax that fits this principle.?

Answer 1

The benefits-received principle of taxation holds that an individual's tax burden should be proportional to the amount of "benefit" that the individual receives from the resource in question. For example, if road construction and maintenance were funded entirely from gasoline taxes and highway tolls, this would be in line with the benefits-received principle (not really true, but just play along for the example). Those who used the highway more often would pay more of these taxes, while those who only walked or biked would not pay any taxes at all for a road system that they don't use. This principle, in reverse, is also used to support so-called 'sin' taxes, like the tax on tobacco -- in this case, smokers are charged an extra tax in order to offset the supposed extra costs they bring to government health care programs later in life.

By contrast, another major principle of taxation is 'ability to pay,' which underlies the system of progressive income taxation in the US today (the richer pay a higher percentage of income tax because they are better able to pay, not necessarily because they benefit more).


Note to Roadkill (below): I mostly agree with your arguments about the lack of a 'true' benefits-received tax in reality. I was aiming to explain the principle here, and so I used highly simplified examples. I appreciate your point, though, and I changed some of my language to better indicate that these examples are much more complicated in the real world. Thanks.

Answer 2

Benefits Received Principle

Answer 3

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RE:
Explain the benefits-received principle of taxation. Give an example of a tax that fits this principle.?

Answer 4

I liked the road tax example. However, I can't think of a single tax that actually is based on benefits recieved. In reality the gasoline tax is collected by the States and turned over to the Fed's who then distribute it as they see fit. Or threaten to withold the funds to force issues like a national speed limit, or seat belt laws. When the money is released it is used to build roads and bridges to no where while the tax payers bounce back and forth to work on poorly maintaned road ways.

The "sin" taxes are another false example. The "extra" burden on health care is less for the average smoker than for the average person in general. They die before they are able to extract the amount they pay in taxes.

Its not really a principle more than just another excuse to raise taxes.

Answer 5

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B. Taxing gas to pay for roads puts the burden of road maintenance on the people who use roads, drivers who also use gasoline.