Describe the difference between the benefits principle of taxation vs the ability to pay. Describe the difference between vertical equity and horizontal equity as it pertains to taxes.

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Describe the difference between the benefits principle of taxation vs the ability to pay. Describe the difference between vertical equity and horizontal equity as it pertains to taxes.

Describe the difference between the benefits principle of taxation vs the ability to pay.

Describe the difference between vertical equity and horizontal equity as it pertains to taxes.

business economics

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Answer 1

Answer #1

Benefits principle of taxation based on the willingness to pay tax for public goods and services and expenditures.
So, the relationship would be one who can pay the tax (Ability) he should always pay the tax (Willingness) for quotes

Vertical Equity: As per vertical equity those who are earning more they should give more tax. That means the tax rate should be higher than the normal tax rate paid by normal consumer.
Ex. One earns $100,000 is subject to a 10% tax rate and another who earns $200,000, applicable tax rate is 20%.

Horizontal Equity: It tells that 2 person with same income bracket and same wealth should be taxed at same rate.
Ex. Two persons with the annual income $100,000, both of them should be taxed at 10%.

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Answer 2

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Describe the difference between the benefits principle of taxation vs the ability to pay. Describe the difference between vertical equity and horizontal equity as it pertains to taxes.

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Describe the difference between the benefits principle of taxation vs the ability to pay. Describe the difference between vertical equity and horizontal equity as it pertains to taxes.

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Describe the difference between the benefits principle of taxation vs the ability to pay. Describe the difference between vertical equity and horizontal equity as it pertains to taxes.