Question 1

The Australian government raise revenue using various taxes. The equity of a tax system concerns whether the tax burden is distributed fairly among the population.

a)Explain the concept of horizontal equity and state any possible difficulties in its application.

(1 mark)

b) State any two arguments why wealthy taxpayers should pay more taxes than poor taxpayers.

c) Categorize each of the following funding schemes as examples of either the benefits principle or the ability-to-pay principle. Clearly state your reasons. (3 marks)

i.An airport trust fund collects a tax on each plane ticket sold and uses the money to improve airports and the air traffic control system.

ii.Visitors to many national parks pay an entrance fee.

iii. Local property taxes support elementary and secondary schools.