A utilitarian criterion embodying both horizontal and vertical equity commands is proposed which determines the equitable income tax. We show that a family size related tax credit cannot be considered equitable, whereas an exemption can if a particular social evaluation function, defined over income and needs, is adopted, one which is, except in the narrowest of circumstances, inconsistent with the widespread practice among social policy analysts of equivalizing incomes to take account of needs. This finding presents a challenge to find a deeper justification for the use of credits (and indeed, exemptions) by tax designers.