What describes the principle that ensures taxpayers are treated fairly based on their income levels?

The principle that ensures taxpayers are treated fairly based on their income levels is referred to as tax equity. This concept embodies the idea that individuals and entities should pay taxes in accordance with their ability to pay, which is often measured using income levels. Tax equity can be understood through two main concepts: horizontal equity, which suggests that individuals with similar income and circumstances should pay similar amounts in taxes, and vertical equity, which indicates that those with greater financial means should contribute a larger proportion of their income compared to those with lesser means.

By promoting fairness in the taxation system, tax equity aims to reduce disparities and ensure that the burden of taxation does not disproportionately fall on low-income individuals. This principle is essential in maintaining public trust in the tax system and ensuring that funding for public services is both just and adequate.

In contrast, tax expenditure pertains to government revenue losses due to tax exemptions, deductions, or credits, while stewardship refers to the responsible management of public resources. User fees, on the other hand, are charges for specific services provided by the government and do not directly relate to the fairness of the tax system based on income. Understanding tax equity is crucial for evaluating and advocating for just tax policies that reflect the social responsibilities of individuals and the government in a society