Which one of the following situations demonstrates the “equity” characteristic of a good tax?

Question

Policy-makers introduce new forms to improve readability of paperwork for consumers.

Policy-makers lower the tax rate for individuals earning income below the poverty threshold.

Policy-makers reform the tax system to allow more taxpayers to prepare their own forms.

Policy-makers revamp tax collection procedures to save costs.

Answer 1

The situation that demonstrates the “equity” characteristic of a good tax is:

Policy-makers lower the tax rate for individuals earning income below the poverty threshold.

This option reflects the principle of equity, as it focuses on fairness and the ability to pay. Lowering the tax rate for individuals earning below the poverty threshold helps to alleviate the tax burden on those who are less able to afford it, promoting a more equitable tax system.