Vertical Equity

It is used in taxation where the personal liabilities of the individual increase with income, where the basic principle is that- the individual with higher income and more assets should pay more tax.

Another method used in such calculations is horizontal equity, where all citizens are subject to the same absolute amount of taxes. The state considers and guarantees equal legal rights and imposes the same liability. 

Vertical is used along with the ability to pay, which means the total tax paid by a person should be proportional to the total wealth created through alternative asset class, illiquid assets, and average stock market return UK or others - as per the capacity one may have to bear the tax burden.

It is followed in the US, where the tax on earnings up to $8,025 = 10%, $24,525 = 15% and $49,100 = 25%.

Other methods include proportional equity, where all individuals pay the same rate. As a person's wealth increases, the absolute amount of the tax liability increases at the same rate. 

Progressive is the method where the per cent of income increases with wealth, and the regressive method is where low earners pay more to the state.