benefit principle of taxation definition economics

First, it is myopic in its assessment of particular taxes without considering how those taxes fit within the broader institutional arrangement. But the second approach argues that the project of fairly distributing the tax burden is misconceived for two reasons. Thus, various principles of distribution follow: the tax burden should be distributed according to ability to pay, or benefits received, and so on. It conceives of the collective tax burden as a social invoice that must be fairly distributed across that pretax allocation. The first approach assesses taxation as an institutional interference with a pretax allocation of resource entitlements.

However, the fragments can be roughly sorted into two broad approaches to questions of tax justice.

The results of the engagement are fragmentary and often inconsistent. Historically, experts in the technical and practical (such as economists and policymakers) have more readily engaged this tangle of considerations than experts in normative theory (such as philosophers), although that is beginning to change. As well, claims about fair taxation always implicate technical and practical considerations alongside their normative dimensions. This is partly explained by the protean character of modern taxation: taxes allocate resources, create incentives, fund public goods, address collective action problems, and more. Yet there exists no widely accepted theory of tax justice. It also confronts citizens with the coercive power of the state in an immediate way. Taxation is perhaps the most important mechanism for realizing a conception of distributive justice.

Benefit principle of taxation definition economics