vertical equity
vertical equityThe place of income distribution considerations in economic policies such as taxation. Consider for example the question of how far taxation should be progressive. While there is fairly general agreement that it is necessary to exempt the very poor from income tax, so that some degree of progression is inevitable, the proper degree of progression is controversial. Some economists maintain that taxes should be as progressive as is consistent with preserving incentives for effort and saving, and the need to keep the rich within the official economy. Others prefer keeping taxes as nearly proportional as is consistent with exemptions for the very poor. Vertical equity is distinguished from horizontal equity, which is concerned with considerations of fairness between people with roughly equal incomes. See also progressive tax.
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