Horizontal and Vertical Equity in Taxation as Constitutional Principles: Germany and the United States Contrasted


When confronted with a constitutional challenge to a tax statute, the U.S. Supreme Court has applied its least intrusive standard of review. The Court has never held a federal tax law, and only occasionally state tax laws, to conflict with the individual’s basic rights and privileges under the Bill of Rights. The German Constitutional Court, applying more intensive scrutiny, frequently has held tax laws to conflict with similar basic individual rights and privileges under the German constitution.

Those decisions of the Germany Constitutional Court require parity – horizontal equity -- among taxpayers and suggest, but, do not require, progressivity in taxation – vertical equity. Decisions of the German Constitutional Court have determined the protections to be robust and have rendered such matters as mandatory joint assessment of married couples, retroactive application of rate increases, deductibility of political contributions, income taxation of the subsistence minimum, valuation disparities in the wealth and inheritance taxes, and, quite recently, a tax that the government in practice could not assess and collect, uniformly unconstitutional.

The article reviews similarities between the German and U.S. tax laws, describes constitutional tax decisions from both courts, and hypothesizes reasons for the disparities in protection between the courts.