![]() ![]() Wealth taxes were once more popular than they are today. In reality, the tax systems usually take some of these factors into account and treat some of these expenses as "deductibles" - the amount that can be deducted from the amount of taxable income. ![]() But what if the second person actually has to pay off student debt from college? Now, it is getting harder to say who has a better ability to pay taxes the more factors we consider. What do we mean when we say that two taxpayers are similar? Sure, they may have the same monthly income, but does that necessarily mean that their ability to pay taxes is also the same? No, because other factors also matter to the ability to pay taxes.įor example, what if one of them has to raise two children, and the other one doesn't have children? Then, with the same income, the second person can afford to pay more in taxes because he/she doesn't have to spend money on raising two kids. But in reality, the details are trickier. ![]() It sounds simple, doesn't it? If two taxpayers are similar, their tax payments should also be similar. Horizontal equity is the idea that people with a similar ability to pay taxes should pay a similar amount of taxes.
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