![]() ![]() The benefits-received principle thus suggests that taxes should rise with income, just as the ability-to-pay principle does. Thus, people with higher incomes benefit more from public goods. ![]() The demand for public goods generally rises with income. Income taxes to finance public goods may satisfy both the ability-to-pay and benefits-received principles. Such fees can be used only for goods for which exclusion is possible a user fee could not be applied to a service such as national defense. A student paying tuition, a visitor paying an entrance fee at a national park, and a motorist paying a highway toll are all paying to consume a publicly provided service they are thus paying directly for something from which they expect to benefit. User fees for government services apply the benefits-received principle directly. The property tax can thus be viewed as a tax on benefits received from some local services. The greater their benefit, the greater the property tax they pay. People are willing to pay more for houses served by those schools, so property values are higher property owners benefit from better schools. Suppose, for example, that public schools in a particular area are especially good. ![]() Local governments rely heavily on taxes on property, in large part because the benefits of many local services, including schools, streets, and the provision of drainage for wastewater, are reflected in higher property values. An alternative criterion for establishing a tax structure is the benefits-received principle, which holds that a tax should be based on the benefits received from the government services funded by the tax. ![]()
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