Horizontal equity
I.means that those taxpayers who have the greatest ability to pay the tax should pay the greatest proportion of the tax.
II.means that two similarly situated taxpayers are taxed the same.
III.is reflected in the progressive nature of the federal income tax system.
IV.exists when Avis, a single individual with 4 dependent children, and Art, a single individual with no dependents, both pay $2,400 income tax on equal $26,000 annual salaries.

Question

Quizplus · Accepted Answer

Horizontal equity means that two taxpayers in the same situation should be taxed the same. This is reflected in the progressive nature of the federal income tax system (statement III). Statement II is also correct as it is a direct result of horizontal equity. Statement I is not entirely accurate as it only applies to progressive taxation, and not all tax systems follow this principle. Statement IV is incorrect as it violates horizontal equity principles since Avis and Art are not in the same situation (one has dependents, and the other does not). Therefore, the best choice is B.

Horizontal Equity I.means That Those Taxpayers Who Have the Greatest Ability to Ability