The appropriate tax rate to consider judging the vertical equity of a tax system is the ?
Correct answer: B. average tax rate
- A. marginal tax rate
- B. average tax rate
- C. horizontal tax rate
- D. proportional tax rate
Explanation
Vertical equity compares the tax treatment of people at different income levels, so the average tax rate shows each group's overall tax burden as a share of income. The marginal rate applies only to the next unit of income.
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About Public Finance
Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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