Average and Marginal Tax Rates 532 Vertical and Horizontal Equity 533 Measuring Vertical Equity 534 Application: The Political Process of Measuring Tax Fairness 534 18.4 Defining the Income Tax Base. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 536 The Haig-Simons Comprehensive Income Definition 536 Deviations Due to Ability-to-Pay Considerations 537 Deviations Due to Costs of Earning Income 538 Application: What Are Appropriate Business Deductions? 538
18.5 Externality/Public Goods Rationales
for Deviating from Haig-Simons.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 Charitable Giving 540 Spending Crowd-Out Versus Tax Subsidy Crowd-In 541 Consumer Sovereignty Versus Imperfect Information 543 Housing 543 Empirical Evidence: The Social Benefits of Homeownership 545 Tax Deductions Versus Tax Credits 546 Application: The Refundability Debate 547 Bottom Line: Tax Expenditures 549