“The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.” Economists, who not typically deal with geese, cite two criteria for designing a tax system The first is based on the ability of people to pay taxes and the second focuses on the benefits they receive from particular government services Ability to Pay The ability-to-pay principle holds that people with more income should pay more taxes As income rises, the doctrine asserts, people are able to pay more for public services; a tax system should therefore be constructed so that taxes rise too Wealth, the total of assets less liabilities, is sometimes used as well as income as a measure of ability to pay The ability-to-pay doctrine lies at the heart of tax systems that link taxes paid to income received The relationship between taxes and income may take one of three forms: taxes can be regressive, proportional, or progressive Regressive Tax A regressive tax is one that takes a higher percentage of income as income falls Taxes on cigarettes, for example, are regressive Cigarettes are an inferior good—their consumption falls as incomes rise Thus, people with lower incomes spend more on cigarettes than people with higher Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 806