Vertical equity implies that
i.tax rates should be equal for all tax payers.
ii.people with higher income should pay more in taxes.
iii.people with higher incomes should pay a lower average tax rate.
A) i only
B) ii only
C) iii only
D) i and ii
E) ii and iii

Question

Quizplus · Accepted Answer

Vertical equity implies that individuals with higher incomes should pay more in taxes as they have a greater ability to pay. This is reflected in choice ii. Choice i, where tax rates are equal for all taxpayers, does not reflect this principle. Choice iii, where people with higher incomes pay a lower tax rate, goes against vertical equity as it would result in individuals with lower incomes paying a higher percentage of their income in taxes.

Vertical Equity Implies That