Discussion
When individuals with unequal tax paying ability are taxed unequally in order to equalise the sacrifice is called :
Answer: B
This is vertical equity.
Vertical equity means that people with different abilities to pay should pay different amounts of tax, with those more able to pay bearing more, so that the sacrifice is equalised. Progressive income tax is its main instrument.
Horizontal equity is the other half of the ability-to-pay principle: people in the same circumstances should pay the same tax. Taxable capacity is the maximum tax a people can bear, and tax avoidance is the legal reduction of one's tax liability. Neither is about taxing unequals unequally.
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