Taxable capacity refers to the maximum amount of taxes that can be collected from citizens without negatively impacting production. Economists have defined taxable capacity as either reaching the point where taxpayers must borrow to pay taxes, or as the optimum level of public finances indicated by financial principles. Taxable capacity can be absolute, referring to the maximum without unpleasant effects in a community, or relative, comparing the capacities of different communities. Understanding taxable capacity is significant for public finance administration as taxes are a major source of government revenue.