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7 <br />Understanding Tax Equity <br />• Benefits principle —both households pay $7,000 in taxes. Poor <br />household pays 28% of their income and rich household pays 4.6% of <br />their income. Is this fair? Both paying and receiving the same dollar <br />value of output, but paying different percentages for it. <br />• Ability to pay principle —poor household pays 5% of their income <br />($1,250) and rich household pays 10.2% of their income ($12,750). Is <br />this fair? Poor household is receiving an extra $5,750 of value that <br />they didn't pay for ($7,000 - $1,250) and rich household is losing <br />$5,750 that they paid for but didn't get ($12,750 - $7,000) <br />CCM Economics, LLC OC Tax Equity Study <br />