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The benefits received principle of taxation is the theory that citizens who have received advantages from the government (in the form of public goods and services) should pay for them. For example, those who use a certain road system should pay for maintaining those roads. This is one of the main ideas behind taxation: that public goods should be available for citizens, and that citizens will provide taxes and other forms of payment that will make them possible. However, the U.S. tax system is a “progressive” or “ability to pay” system, which is different than a system based purely on the benefits received principle. These payments can be through taxes, tolls, fees, and/or other methods.
Is the Ability to Pay Principle Better Than The Benefits Received Principle in Taxes?
The ability to pay principle states that those with greater ability to pay for public goods should pay more. The idea is that those with greater means are better able to contribute to the general good. This contrasts with the benefits received theory of taxation, which is based on the idea that all who use a benefit pay for it. The two principles are similar, though, as they both could alter taxes based on variable factors.
One could argue that citizens with greater resources got them through hard work and should not be forced to pay more taxes without receiving direct benefits. However, an opposing argument is that those with greater means often achieved them at least partially by receiving the benefits of society (which taxes help to fund).
Examples of Taxes Based on the Benefits Received Principle
What taxes follow the benefits received principle? A benefits received tax on gasoline uses the proceeds to fund road construction and maintenance. Those who pay the gas tax are likely to receive the benefits of roads. Another example that hits close to home for many is taxes that fund education, which millions of citizens use every day to improve their lives.