Sarah makes 100,000 AUD per year from his inherited high-valued real estate assets and would be...

Sarah makes 100,000 AUD per year from his inherited high-valued real estate assets and would be able to earn little income otherwise. Samantha does not have any assets and has a minimum-wage job. Could their ability to pay be the same? Why yes/no?

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Expert Solution

Ability to pay is an economic principle that states that the amount of tax an individual pays should be dependent on the level of burden the tax will create relative to the wealth of the individual. The application of this principle gives rise to the progressive tax system, a system of taxation in which individuals with higher incomes are asked to pay more tax than individuals with lower incomes. The ideology behind this principle is that individuals and business entities that earn higher income can afford to pay more in taxes than lower-income earners.

In the above situation since Sarah gets a monthly income of $100,000 AUD from her inherited high valued real-estate assets. But Samantha does not have any assets and has a minimum-wage job.

No, their ability to pay can't be same as Sarah earns more than Samantha whatever the source may be. So, if she earns higher income definitely she has a higher ability to pay than a person earning lower income.

Rahul Sunny answered 6 months ago

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