How is tax equity defined in taxation?

Tax equity is fundamentally about fairness in the tax system. It is defined as ensuring that taxpayers who are in comparable financial situations bear a similar tax burden. This principle aligns with the idea that individuals with similar abilities to pay should contribute equally to funding public services and government functions.

When tax equity is upheld, it creates a sense of fairness and justice in the tax system, where individuals and entities are treated consistently based on their financial standing. This is essential in promoting compliance and trust in the system, as it discourages perceptions of favoritism or discrimination.

Other options do not align with the concept of tax equity. Favoring the wealthy or prioritizing business interests would introduce disparities rather than equity, and implementing a flat-rate tax does not account for individual financial situations, which could lead to inequities among taxpayers of differing means. Thus, option C accurately captures the essence of tax equity.