Equity in taxation

Uniformity in taxation is effected through the apportionment of the tax burden among the taxpayers which, under the Constitution, must be equitable. "Equitable" means fair, just, reasonable and proportionate to the taxpayer’s ability to pay. Taxation may be uniform but inequitable where the amount of the tax imposed is excessive or unreasonable.

Ability to Pay Theory: The ability to pay is another criterion of equity or fairness in taxation. This theory requires that individuals should be asked to pay taxes according to their ability to pay. The rich have greater ability to pay, therefore they should pay more tax to the Government than the poor. According to the concept of horizontal equity, equals should be treated equally, that is, persons with the same ability to pay should be made to bear the same amount of tax burden. According to the vertical equity, unequals should be treated unequally, that is, how the tax burden among people with different abilities to pay is divided. (The Principle of Equity in Taxation – Explained! www.yourarticlelibrary.com)

The constitutional requirement of equity in taxation also implies an approach which uses a reasonable classification of the entities or individuals who are to be affected by a tax. Where the "tax differentiation is not based on material or substantial differences," the guarantee of equal protection of the laws and the uniformity rule will likewise be infringed.

It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion. — Adam Smith.The meaning of ability-to-pay can be controversial at the margins. For example, commentators often refine the ability-to-pay fairness concept by subdividing it into a horizontal equity component (taxpayers with equal incomes should pay equal amounts of tax) and a vertical equity component (taxpayers with unequal incomes should pay amounts of tax which are sufficiently unequal to fairly reflect the differences in their incomes). (https://dash.harvard.edu)

See David F. Bradford, Untangling the Income Tax 150-53 (1986); Joseph M. Dodge. The Logic of Tax 88 (1989): Michael J. Graetz & Deborah H. Schenk, Federal Income Taxation: Principles and Policies 31 (3d ed. 1995); William A. Klein, Policy Analysis of the Federal Income Tax 7 (1976): Joel Slemrod & Jon Bakija, Taxing Ourselves, 49-50,52-54,73-74 (1996); EricM. Zolt, The Uneasy Case for Uniform Taxation, 16 Va. Tax Rev. 39, 86-98 (1996).

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