pg8 - taxpayers with a greater ability to pay should be...

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taxpayers with a greater ability to pay should be subject to a higher tax rate. Governmental units provide tax preferences for a variety of reasons – e.g., encourage investment, social objectives, etc. Whether one views these tax preferences as appropriate or not, greatly influences whether one considers a tax system to be fair in general and specifically, horizontally equitable. Specifically, if one views a tax preference as being inappropriate, this would adversely affect one’s view of horizontal equity. (29) [LO3, LO5] Montel argues that a flat income tax rate system is vertically equitable. Oprah argues that a progressive tax rate structure is vertically equitable. How do their arguments differ? Who is correct? Vertical equity is achieved when taxpayers with greater ability to pay tax, pay more tax relative to taxpayers with a lesser ability to pay tax. One can view vertical equity in terms of tax dollars paid or in terms of tax rates. Proponents of a flat income tax or sales tax (i.e., proportional tax
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This note was uploaded on 04/04/2012 for the course ACCT 26373 taught by Professor Hall during the Spring '10 term at Texas State.

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