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Tax equity: Horizontal v Vertical

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  • 03-12-2011 2:10pm
    #1
    JimmyR
    Registered Users Posts: 75 ✭✭


    Folks,

    I don;t really understand the difference in the concepts of Horizontal compared to Vertical equity when it comes to the payment of taxes.

    My understanding of it is that Horizontal equity means that everyone on roughly the same income pay roughly the same taxes. I would understand this to be our current tax system.

    Vertical equity to my understanding is where people with a greater ability pay more.

    Now this is where I'm confused is that not the same thing? I would understand our tax system as a vertical system where you pay more or less depending on whether you earn more or less( move up or down). I would then imagine that depending on what taxes you pay you are paying similar taxes to someone on the horizontal axis to you!!


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    #2
    irish_goat
    Moderators, Recreation & Hobbies Moderators Posts: 5,774 Mod ✭✭✭✭irish_goat


    As I understand it we have both vertical and horizontal equity in Ireland but that isn't always necessarily the case. i.e. If people on the same wage were taxed differently depending on whether or not they were public/private sector.


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    #3
    JimmyR
    Registered Users Posts: 75 ✭✭JimmyR


    irish_goat wrote: »
    As I understand it we have both vertical and horizontal equity in Ireland but that isn't always necessarily the case. i.e. If people on the same wage were taxed differently depending on whether or not they were public/private sector.

    Would it be the case that our PAYE system taxes horizontally and vertical taxation would be where people were judged on their abilty to sustain tax increases due to wealth other than their salary, examples being property, investments etc.

    When you say that the Public/Private sector are taxed differently are you referring to pensions levies in the public sector. both take the same wage but Public servants are better able to pay in the long run due to guaranteed pension - vertical equity.


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