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Vertical equity

The view that people in an advantageous position should make a greater contribution to society. The difficulty with applying this concept is in defining what is an advantageous position. Applied to taxation vertical equity has the implication that the amount of tax paid should increase with income, if income is viewed as an appropriate measure of advantage. However, an alternative perspective that is equally valid is that advantage should be measured by the ability to earn income. Vertical equity would then seek greater contributions from high-ability individuals than from low-ability individuals regardless of individual decisions on whether or not to apply ability to earn income. Vertical equity is distinguished from horizontal equity, which is concerned with considerations of fairness between people with roughly equal incomes.

Reference: Oxford Press Dictonary of Economics, 5th edt.