Define horizontal and vertical equity and discuss the concepts with respect to legitimacy and usefulness

Question

What will be an ideal response?

Answer 1

The principle of horizontal equity states that people with an equal ability to pay should pay the same tax while the principle of vertical equity states that people with a greater ability to pay should pay an appropriate amount more than those with less ability to pay. Both horizontal and vertical equity are legitimate because both principles are generally recognized as normative measures of fairness in taxation. In terms of usefulness, both criteria are difficult to implement if it is difficult to measure ability to pay, which it usually is, being a normative concept. In addition, it is often difficult to know how much extra those with a greater ability to pay need to pay to satisfy the principle of vertical equity.