Question

The federal gasoline tax is assessed on a per-gallon basis and the proceeds are used for highway maintenance and improvements. This tax is consistent with the:_____

a. ability-to-pay principle of taxation.
b. benefits-received principle of taxation.
c. single-tax theory of taxation.
d. pay-as-you go ("Paygo") theory of taxation.

Answer 1

The correct answer is option b. benefits-received principle of taxation.

Step-by-step explanation:

The benefits received principle of taxation is based on the concept that the tax you pay now, will be used to provide you with benefits later.

In above scenario, the tax assessed on per gallon of fuel will be used for the maintenance of highway and improvements. This mean that indirectly benefits are being provided with the help of tax proceeds.

This is an example of benefits-received principle of taxation.