Vertical Equity


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Vertical Equity

The concept that persons with more income and/or wealth should pay higher tax rates than those with less. This should, in theory, lead to a more equal society. While vertical equity is controversial, most countries have adopted some form of a progressive income tax, which is based on the idea.
References in periodicals archive ?
In highlighting the limits of horizontal and individualist approaches to healthcare equity, Gavin raised two central questions: 'If, as is normally the case, ill health is not randomly distributed across different groups in society' but socially determined, 'might that society not want to give preference, on vertical equity grounds, for health gains to those groups in that society who are on average in poor health?
Emphasising that that principles of horizontal and vertical equity are important if a tax system is to be seen as fair, Mukherjee said that tax administration, which includes mechanisms to register taxpayers, collect revenue, enforce compliance and provide redress when required, also has a direct bearing on fairness of tax policy.
Vertical equity requires that the rate of tax applied to people of different income increases smoothly with their income and requires increasing marginal rates of tax.
Its outline will also include horizontal and vertical equity in healthcare finance and delivery; equity indicators e.
Equity is generally measured against two criteria: vertical equity requires that a person who is capable of paying more tax should pay more tax; while horizontal equity requires that a person who is in same circumstances as another person should pay the same amount of tax as that other person.
If your house is worth twice as much as mine, you pay twice as much property tax, satisfying the vertical equity criterion.
In contrast, vertical equity refers to the ability of the concession to produce similar outcomes for people in different financial circumstances.
Vertical equity would require individuals with a greater ability to pay to shoulder a greater tax burden than others less able.
Questions of horizontal equity (the equal taxation of equal) and vertical equity (addressing social inequality through taxation) are also central to many contemporary debates surrounding economic and tax policy.
Horizontal equity requires that those with the same housing need receive the same housing assistance, while vertical equity means that those with more need should receive more assistance.
This paper examines the effects of the Tax Reform Act of 1986 (TRA86) on the relationship between corporate taxes and ability to pay taxes using two dimensions of tax equity, horizontal equity and vertical equity.
According to Republican candidate Steve Forbes, this lack of vertical equity makes mid-size firms good candidates for the flat tax.