Asked by Rajkishore Mishra on May 06, 2024
Verified
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.
Mortgage-Interest Deduction
A tax deduction for mortgage interest paid on the first $750,000 of mortgage debt, available to U.S. taxpayers.
Horizontal Equity
The principle that individuals with similar financial situations should be treated equally by the taxation system.
Egalitarian
Pertaining to or believing in the principle that all people are equal and deserve equal rights and opportunities.
- Identify concepts of horizontal and vertical equity in taxation.
Verified Answer
JV
Jesus VasquezMay 10, 2024
Final Answer :
B
Explanation :
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.
Learning Objectives
- Identify concepts of horizontal and vertical equity in taxation.