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July 22, 2019 

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ABILITY-TO-PAY PRINCIPLE: A principle of taxation in which taxes are based on the income or resource-ownership ability of people to pay the tax. The income tax collected by our friends at the Internal Revenue Service is one of the most common taxes that seeks to abide by the ability-to-pay principle. In theory, the income tax system is set up such that people with greater incomes pay more taxes. Proportional and progressive taxes follow this ability-to-pay principle, while regressive taxes, such as sales taxes and Social Security taxes, don't.

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PRIVATE PROPERTY:

An economic institution in which goods, resources, commodities, or other assets (property) are owned and controlled by households and businesses (the private sector) rather than government (the public sector). Private property is a key institution, along with individual freedom and competitive markets, that helps to form the structure of capitalism.
Private property creates critical incentives for the efficient operation of competitive markets used in a market-oriented economy. Under private-property ownership, control over resources is relinquished (that is sold) when owners are compensated for their opportunity cost. Owners have the incentive to sell their assets to the highest bidder, which means resources are being directed to the highest valued uses. This is just the sort of thing that leads to an efficient use of resources.

The alternative to private property is collective ownership of property, also termed common-property goods. This can take the form of direct government ownership, such as public parks or municipal office buildings, in which a specific government entity also has control of the property. Or it can take the form of shared public ownership, such as the oceans or atmosphere, in which every member of society in principle shares ownership, but no one in particular has actual control of the property.

<= PRIVATE GOODSPRIVATE SECTOR =>


Recommended Citation:

PRIVATE PROPERTY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2019. [Accessed: July 22, 2019].


Check Out These Related Terms...

     | property rights | ownership and control |


Or For A Little Background...

     | private sector | public sector | incentive | efficiency | institution |


And For Further Study...

     | government functions | three questions of allocation | free enterprise | capitalism | laissez faire | opportunity cost |


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