If everyone paid the same amount in taxes despite varying levels of income, this would not be progressive. The more you make, the more you pay in taxes. If this sounds familiar, it's because it is! Recall that a progressive tax system increases the tax rate as an individual's income increases. In other words, the more someone makes in income, the more they should pay in taxes. In contrast, vertical equity states that people with a higher ability to pay should be paying more in taxes. What about if Rick had to pay a lot in hospital bills due to sickness? While Rick and Bianca still earn $70,000 a year, it doesn't seem as equitable anymore, given that Rick will be paying a lot more in hospital bills. Horizontal equity becomes difficult to implement when we think about other factors. Measuring Domestic Output and National Incomeįor example, if Rick and Bianca both make $70,000 a year, then they should pay the same amount in taxes.Sources of Revenue for State Government.Sources of Revenue for Local Government.Monetary Policy Actions in the Short run.Long-Run Consequences of Stabilization Policies.Expansionary and Contractionary Fiscal Policy.Factors Influencing Foreign Exchange Market.Comparative Advantage vs Absolute Advantage.Expansionary and Contractionary Monetary Policy.Equilibrium in the Loanable Funds Market.
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