Joe earns $52,000 per year, and his income tax rate is 15%. Sally earns $75,000 per year, and her tax rate is 25%. This income tax is based on which principle of fairness? A- The benefits received principle
B- The ability to pay principle
C- The wealth equality principle
D- The income balancing principle

B- The ability to pay principle

Explanation:

Taxation can be defined as the involuntary or compulsory fees levied on individuals or business entities by the government to generate revenues used for funding public institutions and activities.

In this scenario, Joe earns $52,000 per year, and his income tax rate is 15%. Sally earns $75,000 per year, and her tax rate is 25%. Therefore, this income tax is based on the ability to pay principle of fairness.

The ability to pay principle can be defined as an economic principle which states that, an individual should be made to pay his or her tax based on the level of burden of a tax rate with respect to the level of income. Therefore, an individual who earns more income would pay more tax because they have the ability to pay more.

Hence, the ability to pay principle measures an individual's wealth and financial income. Just like progressive taxation, it involves charging individuals having higher incomes a higher percentage of their total income.

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