What does horizontal equity in income tax imply about taxpayers with similar income levels?

Horizontal equity in income tax means that taxpayers with similar income levels should pay the same amount of taxes. This principle is based on the idea of fairness, where individuals in similar financial circumstances are treated equivalently by the tax system. If two taxpayers earn the same income, horizontal equity suggests that they should contribute equally to the tax system in terms of tax liability, ensuring that the tax burden is distributed fairly among those with comparable means.

This principle serves to promote equity and prevent situations where individuals with the same ability to pay end up facing different tax burdens due to arbitrary distinctions in the tax code. Thus, achieving horizontal equity is an important goal of a well-designed tax system, as it enhances public trust and compliance by reinforcing that the system treats taxpayers uniformly.