Benefit Principle

Definition

Health Economics

  • This is the idea in the (normative) theory of taxation that what is paid by an individual as tax ought to be related to (even proportional to) the benefit derived from the way in which the tax proceeds are used. It is a virtually impossible principle to apply consistently or accurately, even when taxes are earmarked, especially in the presence of public goods and externalities, but has been quantified through methods of estimating individuals' willingness to pay such as conjoint analysis or discrete choice analysis.
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