A progressive rate structure and a proportionate rate structure both result in vertical equity across taxpayers.
This statement is false.
Vertical equity is a method of taxing income that pays more tax as income increases. Vertical equity is based on the principle of solvency through progressive or proportional taxation.
Horizontal equity is the principle that taxpayers with the same income should pay the same tax. Vertical equity requires tax liability to scale with income, so if A has more income than B, then A owes more income tax than B.
Vertical equity is also called “progressive taxation” because tax rates rise with income. It is much easier to implement the concept of vertical equity in an income-based tax than in a wealth-based tax.
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