Business and Personal Finance Dictionary

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z 

• ABILITY TO PAY
  
  Refers to the borrower's ability to make interest and principal payments on debts. In context of municipal bonds, refers to the issuer's present and future ability to create sufficient tax revenue to fulfill its contractual obligations, accounting for municipal income and property values. In context of taxation, notion that tax rates should be determined according to income or wealth. Also, A principle of taxation. Individuals who earn more income pay more tax, not because they use more government goods and services but because taxpayers who earn more have the ability to pay more. The progressive tax, or higher tax rates for people with higher incomes, is based on this principle.
  
  Back