What type of equity is achieved when taxpayers in similar situations pay the same tax?

The correct answer is that horizontal equity is achieved when taxpayers in similar situations pay the same tax. In a tax system, horizontal equity is a principle that focuses on fairness in the treatment of individuals with comparable ability to pay. This means that if two taxpayers have similar incomes, assets, or financial situations, they should ideally face the same tax burden. This concept promotes the idea of fairness among individuals with similar economic circumstances, ensuring that equity is maintained within the tax system.

In contrast, vertical equity refers to the idea that taxpayers with greater ability to pay (usually those with higher incomes) should contribute a larger amount in taxes compared to those with lesser means. Progressive taxation is a tax strategy where the tax rate increases as the taxable amount increases, which is a separate concept related to vertical equity. Regressive taxation, on the other hand, applies a higher tax rate to lower-income earners than to higher-income earners, which is generally considered less fair as it can disproportionately burden those with fewer resources.