Horizontal equity – implies that we give the same treatment to people in an identical situation. It makes sure we don’t have discrimination on the grounds such as race / gender / different types of work.
Example – if two people earn £15,000 they should both pay the same amount of income tax.
Vertical equity – Implies that people with higher incomes should pay more tax. This means that it wants to tax in a proportional or progressive way – People with more ability to pay should pay more tax. Therefore its important in the redistribution of income.
If we look at the distribution of wealth on the global scale then we can see that China and India have 30% of the population of the world however they only have 8%of the wealth in the economy. Now if we were to look at the distribution of income and wealth in the UK it will show that the issue is much more severe than some people think. The UK has a very high level of income inequality compared to other developed countries.
Although the amount of wealth is increasing in the global economy the gap between the rich an the poor is also increase. This relates to the concept of the trickle down effect. Globalisation and industrialisation has made the poor better off however it has made the rich much better off.