What principle defines a fair tax system based on taxpayers' ability to pay?

The principle that defines a fair tax system based on taxpayers' ability to pay is equity. Equity in taxation implies that individuals should contribute to the tax system in a manner that reflects their financial capacity. This means that those with higher income levels or greater wealth should generally pay more in taxes compared to those with lower income levels, promoting fairness and social justice in the distribution of tax burdens.

This principle supports the idea that taxes should be levied in a way that is proportionate to the taxpayer's ability to pay, which is essential for creating a tax system that is perceived as just by the populace. Equity can encompass different approaches, such as vertical equity, which focuses on individuals in different income levels being taxed at different rates reflective of their ability to pay.

Other concepts like efficiency, proportionality, and progressivity relate to taxation but do not specifically capture the essence of fairness based on ability to pay. Efficiency relates to minimizing economic distortions created by taxes, proportionality refers to a constant tax rate applied to all taxpayers regardless of income, and progressivity refers to a tax system where the tax rate increases as the taxable amount increases, but equity is the broader principle that encapsulates fairness in context of ability to pay.