Horizontal Equity, Once More

This paper reconsiders the proposition, drawn from the Pigovian tradition, that vertical equity is the primary norm for tax design, with horizontal equity a mere derivative therefrom. This is an unlikely conclusion once a broader view of distributive justice is taken: Horizontal equity stands up under alternative approaches, whereas that of vertical equity undergoes drastic change. Even in the utilitarian context there is a good case for viewing horizontal equity as an independent norm. Vertical equity, in that context, is interpreted as minimizing the aggregate welfare cost of taxation. This does indeed mean that horizontal equity is met as well, but only in a perfect policy setting. For the more realistic case of limited policy options, vertical and horizontal equity goals may conflict so that a trade-off will be needed. Independent values must then be assigned to each, confirming the standing of horizontal as well as vertical equity as a primary norm.