Syllabus T. Y. B. A. Paper : IV advanced economic theory with effect from academic year 2010-11 in idol

 
(i) Subjective approach: 
The subjective approach is confined to the psychological or 
mental attitude of the tax-payers. A tax-payer when he pays tax 
given up a part of his real income or savings and thus, undergoes a 
sacrifice. Therefore, it implies that equal sacrifice should be made 
by each tax-payer, then only can there be a just distribution of the 
tax burden. 
 
Concepts of Equal Sacrifice 
The concept of ―equal‖ sacrifice has been variously defined by the 
economists. At least there are three interpretations of it: 
(i) 
equal total sacrifice 
(ii) 
equal proportional sacrifice, and 
(iii) 
equal marginal sacrifice 
 
Equal total or absolute sacrifice implies that the total loss of 
utility on account of tax should be equal for all tax-payers. In other 
words, from each tax-payer the same amount of total utility of 
income must be taxed. 
To express symbolically thus: 

---

Equal absolute sacrifice implies: 
Where, 
Y = income 
T = amount of tax, 
U = total utility 
U (Y) = total utility obtained from income before tax 
U (Y 
– T) = total utility obtained from disposable income after 
tax payment. 
A and B = two different individuals. 
Thus it implies that different income groups are required to 
pay tax differently in such a way that the sacrifice by each individual 
is the same. The poor should, of course, pay less tax and the rich 
should pay more, but the total sacrifice to both should be equal. 
Equal proportional sacrifice suggests that the sacrifice or loss of 
income utility in tax payment should be proportional to the total 
amount of each tax-payer. Thus, 
According to this principle, thus, the direct real burden on 
every tax-payer should be proportionate to the economic welfare 
which he drives from his income.