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Benefits Received

By
Lia Kopin-Green
/
March 14, 2023

What is the Benefits Received Principle?

The benefits received principle is a concept in US tax law that asserts that taxpayers should pay their taxes in proportion to the benefits they receive from certain government services and programs. According to this rule, it is believed that those who benefit from these services and programs, either directly or indirectly, should bear a larger tax burden. Simply put, this rule is designed to maintain fairness within the US tax system. 

Key Takeaways

  • The benefits received principle is a theory in US tax law that asserts that taxpayers should pay their taxes in proportion to the benefits they receive from government services and programs.
  • This concept typically applies to property taxes, income taxes and sales taxes. 
  • The benefits received principle is not the only principle used in US taxation, as other principles such as the ability to pay remain prevalent in the US tax system.

Understanding the Benefits Received Principle

The benefits received principle is a theory derived from the belief that people should pay taxes based on the benefits they receive from the government. In other words, it emphasizes the concept that public goods and services should be available for citizens, and those citizens should pay taxes in order to enjoy these benefits. To better understand this theory, let’s take a look at an example. If you go to a public park with your family, you will benefit from the park’s amenities such as its playgrounds and picnic areas. Under the benefits-received principle, since you are receiving the benefit of the park’s services, you would contribute to the park’s upkeep through taxes.

Ability to Pay Principle

It is important to keep in mind that the benefits received principle is not the only tax theory followed in the United States. The ability to pay principle also plays a significant role in the US tax system. This concept asserts that taxpayers should pay their taxes based on their ability to pay them, rather than on the benefits they receive. The ability to pay principle recognizes that those with higher incomes have a greater ability to pay taxes, and therefore should bear a higher tax liability. 

Together with the benefits received principle, these two tax theories help promote fairness while maintaining the benefits of government services.

Bottom Line

Gaining an understanding of the benefits-received principle, a fundamental concept in US tax law, can provide valuable insight into your taxes for the current year. This principle, along with other key theories such as the ability to pay principle, help ensure that tax burdens are proportional while maintaining proper funding to essential government services and programs. Although identifying the distinctions between complex tax concepts can be challenging, it is crucial to keep in mind that seeking legal assistance can be highly advantageous in gaining a thorough understanding of your tax liability. Schedule a consultation with a tax attorney in your area today at Attorney At Law.

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