Explain the Concepts of Vertical and Horizontal Equity as Goals

Question

Examlex · Accepted Answer

The Answer is Vertical equity is the principle that groups with more resources (higher income,higher wealth,higher profits)should pay higher taxes than groups with fewer resources.There are standard measures of vertical equity,including the extent to which tax systems are progressive,which means that the effective average tax rate rises with income.In contrast,horizontal equity is the principle that people who are similar but make different economic choices should be treated similarly by the tax system.In practice,however,horizontal equity is difficult to measure because it is unambiguous only when taxes differ for reasons independent of choice.Under most tax systems,however,people of identical underlying resources who make different choices will pay different amounts of tax.

Explain the Concepts of Vertical and Horizontal Equity as Goals

Definitions: