ABSTRACT
One of the few principles in public finance that commands wide acceptance is the so-called principle of horizontal equity-that people in equal positions shall be treated equally. On vertical equity-that is, the treatment of people in unequal positions-there is no such agreement. One concept of income has gained wide acceptance, and is termed total accretion. The total-accretion principle is defined as accretion to wealth, which is equal to consumption plus increase in net worth valued at market price for the beginning and the end of the period. Valuation can cause a great deal of work and involve a great deal of arbitrariness. It is by no means clear that a system which attempts to take account of inflation and deflation would be more equitable than one that does not. The problem of the tax-paying unit has been described as the most neglected problem in public taxation. The correct treatment of people in unequal positions, or vertical equity, is more difficult.
