EQUITY, EQUALITY AND WELFARE

This paper argues that horizontal equity (HE) and vertical equity (VE) are two of the basic commands of social justice, and can be seen as h ierarchical: the information content of the VE command is sufficient a lso to implement HE. A general, vector specification of inequity is pr oposed for a tariff (treatment system) which does not satisfy HE and V E. In the case of the income tax, the distinction between the HE and V E commands, and the NR (no reranking) criterion which has coexisted in the income tax literature with these for the last 15 years, is drawn. A complication not recognised by HE and VE is the effect of pursuing the common interest (efficiency) goal of the tariff. The paper conclud es with a call for further work on the meaning and implementation of c oncepts of justice in direct taxation, and on the common interest dime nsion.