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A PRIORI: A presumption made before an analysis is undertaken, often based on experiences, beliefs, or deductions from seemingly self-evident propositions about how the world works. This is a Latin for assumption or axiom. A similar sounding, but opposite term is a posteriori, which is derived from observation or facts. For example, in the study of economics of crime you might assume, a priori, that people are basically "good", because that just seems to be part of human nature, and conclude, a posteriori, that people are more likely to commit crimes when the threat of capture and conviction is lower.
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                           VERTICAL EQUITY: A tax equity principle stating that people with a different ability to pay taxes should pay a different amount of taxes. This is one of two equity principles related to the ability-to-pay principle. The other is horizontal equity, which states that people with the same ability to pay taxes should pay the same amount of taxes. Vertical equity is a basic "fairness" notion of government taxation. If government needs to collect taxes from members of society to finance the provision of public goods and other government operations, then it makes sense to collect those taxes in a fair and equitable manner. One noted criterion of equity is the ability-to-pay principle, stating that taxes should be collected from those who can afford to pay, those with ability to pay reflected by income.Using the ability-to-pay as the criterion for taxes, it also makes sense to collect a different amount of taxes from those with a different ability to pay. Those who have greater ability, pay more taxes. Those with less ability, pay fewer taxes. This across the board tax equality is vertical equity. Suppose, for example, that Jonathan McJohnson earns $50,000 of income as a junior executive at OmniConglomerate, Inc. and pays $5,000 income taxes, a rate of 10%. Vertical equity results if Lisa Quirkenstone, a clerk at the MegaMart Discount Warehouse Supercenter, pays $500 of taxes on $5,000 of income earned from her job, also 10%. Jonathan has greater ability and pays more taxes. Vertical equity is violated if people with a different ability to pay, or income, pay the same taxes. If Jonathan McJohnson has $5,000 of income and Lisa Quirkenstone has $5,000 of income, but due to a special tax deduction for home ownership, Jonathan pays the same $500 in taxes as Lisa, then vertical equity is not achieved. A related tax equity principle is horizontal equity. Horizontal equity holds if people with the same ability to pay, that is, the same income, pay the same tax. Horizontal equity is violated if people with the same ability, pay different taxes.
Recommended Citation:VERTICAL EQUITY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: December 16, 2018].
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Lewis Carroll, the author of Alice in Wonderland, was the pseudonym of Charles Dodgson, an accomplished mathematician and economist.
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"If things are not going well with you, begin your effort at correcting the situation by carefully examining the service you are rendering, and especially the spirit in which you are rendering it." -- Roger Babson, statistician and columnist
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GARP
Generalized Axioms of Revealed Preference
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