The Mirage of Equivalence and the Ethereal Principles of Parallelism and Horizontal Equity

48 Pages Posted: 8 May 2006  

Jeffrey H. Kahn

Florida State University - College of Law


It is universally accepted that "fairness" is an essential requirement of a good tax system. What constitutes fairness, however, is a more complex question than is generally perceived. One expression of perceived fairness is the concept of "horizontal equity," which provides that persons with equivalent amounts of income should pay the same amount of tax. A related, but narrower concept is what I refer to as "parallelism" - that is, the same or equivalent receipts, expenditures or losses should be treated the same by the tax law. One aspect of parallelism, which is the focus of this Article, is the notion that if the reimbursement of an expenditure or loss is excluded from the recipient's income, the same type of expenditure or loss that is not reimbursed should be fully deductible.

Clearly, parallelism should be taken into account in evaluating the merits of some tax provisions. To take it into account, however, does not mean that it must prevail over other legitimate goals of the tax law with which the parallelism concept conflicts. This insight and the analysis of specific provisions have led me to conclude that not only is parallelism not always compelled, it is not always desirable. Each instance of nonparallel treatment of the tax law should be examined separately to determine whether there are competing principles that outweigh the goal for parallel treatment. This Article will examine a number of provisions where the tax law fails to provide parallel treatment for certain reimbursed and unreimbursed expenditures or losses. In each case, I will examine the relevant considerations and reflect on the questions of the proper role of the parallelism concept in the tax system and of the appropriate weight to be accorded that concept.

Keywords: Tax, Horizontal Equity, Vertical Equity, Deduction, Exclusion, Parallelism

JEL Classification: H2, H20, H24

Suggested Citation

Kahn, Jeffrey H., The Mirage of Equivalence and the Ethereal Principles of Parallelism and Horizontal Equity. Hastings Law Journal, Vol. 57, p. 645, 2006. Available at SSRN:

Jeffrey H. Kahn (Contact Author)

Florida State University - College of Law ( email )

425 W. Jefferson Street
Tallahassee, FL 32306
United States
850.644.7474 (Phone)


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