Individuals are allowed to deduct a percentage of their expenditures for health care from their taxable income if these expenditures are above a certain amount. This reduces the amount that must be paid in taxes. Allowing for these deductions would ________ vertical and horizontal equity of the federal income tax.

Question

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Allowing deductions for health care expenditures that exceed a certain amount can improve vertical equity by recognizing the greater financial burden on those with high medical expenses, making the tax system more progressive. It also improves horizontal equity by treating taxpayers in similar financial situations equally, adjusting for significant health care costs.

Individuals Are Allowed to Deduct a Percentage of Their Expenditures