Week 1 Quiz Due 01-17-2021 Sowed Help Save & Exit Submit Which of the following principles encourages a vertically equitable tax system? 12 Multiple Choice Pay-as-you-go Economy Income effects Ability to pay principle O None of the choices are correct Me 12 of 20 Next

Accounting Jan 21, 2021

Expert Solution

The correct option is (d) i.e. ability to pay principle.

Explanation:-

The equity of a tax system speaks to whether the tax burden is distributed fairly among the population. The ability to pay principle states that the amount of tax an individual pays should be dependent on the level of burden the tax will create relative to the wealth of the individual. The ability to pay principle gives rise to two notions of fairness and equity—vertical and horizontal equity.

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