Tax equity is the principle that taxes should be fair. This module introduces a few approaches to assessing equity in taxation. For instance, the benefit-received philosophy, the ability-to pay philosophy, the horizontal equity, and the vertical equity. Apply these equity concepts to analyze the federal income tax. How is the equity principle reflected and how is this principle violated?
You may discuss the equity issue from many perspectives. For instance, how does the progressive tax rate structure reflect the equity principle? The highest federal marginal income tax ratethe income tax rates for rich Americanshave been declining in the past few decades https://www.taxpolicycenter.org/briefing-book/how-do-federal-income-tax-rates-work How does this trend affect tax equity? The federal income tax treats long-term capital gains and salaries income differently. Thus, wage-earners pay higher tax rates than investors. See the figure below. The full article can be reached https://www.bloomberg.com/news/features/2017-09-12/why-american-workers-pay-twice-as-much-in-taxes-as-wealthy-investors
Your analysis should go beyond the textbook chapter and the module resource book. Search related information on the internet to gain a thorough understanding of the federal income tax and its equity issues.
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