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Horizontal equity means that two taxpayers in similar situations pay the same tax.Specifically, if one views a tax preference as being inappropriate, this would adversely affect one's view of horizontal equity.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.For example, a deduction to mortgage interest paid which encourages home ownership.
Horizontal equity means that two taxpayers in similar situations pay the same tax. 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.
Governmental units provide tax preferences for a variety of reasons - e.g., encourage investment, social objectives, etc. For example, a deduction to mortgage interest paid which encourages home ownership.
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.
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