Which of the Following Taxes Best Illustrate the Ability-To-Pay Principle

question 12

Multiple Choice

Which of the following taxes best illustrate the ability-to-pay principle of tax fairness?

• A) Roads and highways are built and maintained through a tax on gasoline.
• B) The local library is funded through a flat $10 tax levied on all homeowners.
• C) A sales tax on food pays for local police and fire protection.
• D) The WIC program provides food to low income mothers and is funded through the progressive federal income tax.
• E) State parks are maintained through the state lottery.

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Definitions:

Insurance

A financial product that provides protection against potential financial losses or liabilities arising from specific risks.

Risk Averse

Describes individuals or entities that prefer to avoid risk and would rather choose options with more certain outcomes over riskier ones.

Insurance

A financial product that provides protection against potential future losses or damages in exchange for a premium.

Risk Neutral

A condition in which an individual or entity shows indifference between choices that have different levels of risk, focusing solely on potential outcomes regardless of uncertainty.