If taxes are collected on the basis of ability-to-pay and there are two taxpayers with the...

If taxes are collected on the basis of ability-to-pay and there are two taxpayers with the same income who also are identical in all other respects, which of the following is correct?

Group of answer choices

Vertical equity exists.

The tax must be proportional.

Horizontal equity exists.

Vertical equity is impossible between these two taxpayers.

The fair-incidence principle is potentially being violated.

Solutions

Expert Solution

Horizontal equity exists

( The ability to pay principle maintains that taxes should be distributed according to the taxpayers to pay them.citizens with greater ability to earn income, for example should be taxed more heavily than those with less capacity to earn .Related to ability to pay are the notions of horizontal equity and vertical equity. Horizontal equity is achieved when individuals of the same amount of taxes per year.

Here, two people have the same income. They are identical in all other aspects too .So they are considered equal for the purpose of deciding how much tax to pay. As a result, horizontal equity exists. )

Rahul Sunny answered 2 years ago

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