On what basis is a tax on expensive speed boats that are purchased only by the wealthy NOT likely to satisfy the condition of vertical equity
A)Wealthy buyers are most likely to be subject to the implications of the flypaper theory of tax incidence.
B)Horizontal equity is most associated with a tax on luxury items.
C)Buyers can easily substitute other luxuries for expensive speedboats.
D)It is very unlikely that the burden of the tax will fall on workers who make the expensive speed boats.

Question

Quizplus · Accepted Answer

Vertical equity implies that those with higher incomes or ability to pay should pay a higher share of taxes. However, if wealthy buyers can easily substitute other luxuries for expensive speedboats, the tax on speedboats may not affect their ability to pay as much as a tax on a necessity like food or housing would. Therefore, the tax may not satisfy the condition of vertical equity.

On What Basis Is a Tax on Expensive Speed Boats