APPROACH TO ABILITY TO PAY

Question 1

Principle of Equal Absolute Sacrifice

Answer 1

Everyone gives up the same amount of utility, regardless of their income level. Each taxpayer should sacrifice the same absolute amount of utility when paying taxes.

if a fall in the marginal utility of income is greater than the rate of

U(Y) - U(Y-T)

Question 2

Principle of Equal Proportional Sacrifice

Answer 2

This principle asserts that the sacrifice should be proportional to each individual’s ability to pay, thus requiring higher-income individuals to contribute a larger absolute amount while still maintaining an equitable relative burden across all taxpayer

Question 3

Principle of Equal Marginal Sacrifice

Answer 3

the principle suggests that the marginal utility of income for each individual should be equal following the imposition of tax