Does the benefits received principle work well for public goods?
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1)Adopting the Flat Tax Structure would significantly reduce the marginal and effective tax rate for most US Taxpayers.
2)It has been argued that adopting the Flat Tax "would also eliminate double taxation".
3)It is a proven fact that adopting the Flat Tax Rate structure would definitely simplify tax preparation process saving US Taxpayers Billions of Dollars in Tax Preparation Fees. Both the Corporate and individuals would be able to file their returns on a simplified form.
4)Adopting the Flat Tax Rate structure has a tendency to encourage savings. This in turn would lead to "more capital formation and thereby stimulate the economy".
5)A Tax Simplification Bill accompanying the Flat Tax may enable all "Businesses to expense all their capital investments", and avoid the complex depreciation rules currently in place. Deducting all business expenses will spur domestic investment and increase growth in the US, leading to greater employment and job growth.
6)It is a progressive tax with a flat rate on taxable income, however, the more an individual saves or invests, the lower his taxable income becomes, thus lowering his total tax payment.
7)Experts have said that adopting the Flat Tax Rate structure "would mean that nearly half of all households would pay no federal income tax under this plan".
8)Adopting the Flat Tax Rate structure is a "simple tax that levies the same tax rate to all Americans regardless of taxable income, while reducing or eliminating income taxes for low income families".
9)It would significantly reduce IRS audits for both individual and businesses.
The benefits received principle is one way of deciding what level of taxation various people should pay. It is one way of deciding what kinds of taxes are fairest. In this view, it is fair that the people who benefit most from a certain thing that government provides are the ones who should pay the most for it. This, for example, is why gas taxes and tolls should be used (in some people’s minds) to pay for highways.
However, this does not work very well (in economic terms) for public goods. One reason for this is that requiring people to pay for their public goods results in a decreased use of those goods. When public goods are provided at essentially no cost to the user, they are allocated efficiently. When a price is placed on them, people stop using them. This means that the benefit received overall goes down. This is not something that we want to have happen in most cases. A second reason is that it is very hard to determine who benefits to what degree from many public goods. For example, how much does each of us benefit from public education? The externalities of that public good make it so that everyone benefits to some degree. But it would be exceedingly hard to determine who benefits how much.
For these reasons, the benefits received principle does not work well for public goods.
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