Two families who live in Plains, GA have identical incomes. The DeWitts deduct $5,000 from their taxable income for mortgage interest paid during the year. The DeMotts family lives in an apartment and is not eligible for a mortgage-interest deduction. This situation exemplifies
A)an application of the benefits principle of taxation.
B)a violation of horizontal equity.
C)a violation of vertical equity.
D)an application of egalitarian tax rules.

Question

Quizplus · Accepted Answer

Horizontal equity means that taxpayers with similar abilities to pay taxes should pay the same amount of taxes. In this case, despite having identical incomes, the DeWitts and the DeMotts are treated differently due to the mortgage interest deduction, violating the principle of horizontal equity.

Two Families Who Live in Plains, GA Have Identical Incomes