>> For the system to be fair in terms of horizontal equity, individuals with similar assets and income have to pay same amount of taxes. Here, Leonard has similar income as Howard. Therefore, both Leonard and Howard have to pay the same amount of tax which is $10000.
>> According to vertical equity taxes paid increase with income earned.
According to Sheldon equity need to be assessed in terms of tax dollars. Let’s find out tax paid per every 1000 dollars for all the cases for comparison
According to Bernadette tax rate should vary with increasing income.
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Tax paid per 1000 is same for all. Therefore. Sheldon would feel that there is vertical equity.
Tax rate is uniform across. Therefore, Bernadette would think that there is no vertical equity.
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