Asked by Svetlana Brenner on May 03, 2024

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How can a proportional tax achieve vertical equity?

Proportional Tax

A tax system where the tax rate remains constant regardless of the amount subject to taxation.

Vertical Equity

A principle of fairness in taxation that dictates taxpayers with a greater ability to pay should contribute more in taxes.

  • Discuss the trade-offs between equity and efficiency in tax systems and the justification of taxes based on the benefits principle.
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KW
Kelci WilsonMay 09, 2024
Final Answer :
Vertical equity is the idea that taxpayers with a greater ability to pay taxes should contribute a larger amount, not necessarily a larger percent. If all taxpayers pay 20 percent of their incomes, someone who earns $50,000 pays twice the amount of taxes as someone who earns $25,000. Thus, a proportional tax achieves vertical equity.