Two families who live in Plains, GA have identical incomes. The Smiths deduct $5,000 from their taxable income for mortgage interest paid during the year. The Jones family lives in an apartment and is not eligible for a mortgage-interest deduction. This situation exemplifies
A)an application of the benefits principle of taxation.
B)a violation of horizontal equity.
C)a violation of vertical equity.
D)an application of egalitarian tax rules.

Question

Quizplus · Accepted Answer

Horizontal equity means that taxpayers in identical situations should be treated the same way. The Smiths and the Joneses have identical incomes, but the Smiths receive a tax benefit (mortgage-interest deduction) that the Jones family does not, which violates horizontal equity.

Two Families Who Live in Plains, GA Have Identical Incomes