In the 1980s, President Ronald Reagan argued that high tax rates distorted economic incentives to work and save. In the 1990s, President Bill Clinton argued that the rich were not paying their fair share of taxes. Which of the following statements best summarizes the economic theories behind the differing philosophies?
A)President Reagan was concerned about vertical equity, whereas President Clinton was concerned about horizontal equity.
B)President Reagan was concerned about average tax rates, whereas President Clinton was concerned about horizontal equity.
C)President Reagan was concerned about marginal tax rates, whereas President Clinton was concerned about vertical equity.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

President Reagan's concern about high tax rates distorting economic incentives to work and save was rooted in the economic theory of marginal tax rates. On the other hand, President Clinton's argument about the rich not paying their fair share of taxes was rooted in the economic theory of vertical equity, which aims to distribute the tax burden based on individuals' ability to pay. Therefore, option C is the best description of the economic theories behind their differing philosophies.

In the 1980s, President Ronald Reagan Argued That High Tax