12 Facts About Tax incidence

The concept of tax incidence was initially brought to economists' attention by the French Physiocrats, in particular Francois Quesnay, who argued that the incidence of all taxation falls ultimately on landowners and is at the expense of land rent.

Tax incidence is said to "fall" upon the group that ultimately bears the burden of, or ultimately suffers a loss from, the tax.

The key concept of tax incidence is that the tax incidence or tax burden does not depend on where the revenue is collected, but on the price elasticity of demand and price elasticity of supply.

The concept of tax incidence is used in political science and sociology to analyze the level of resources extracted from each income social stratum in order to describe how the tax burden is distributed among social classes.

Corporate income tax incidence is difficult to evaluate because although the direct burden is on corporate shareholders, the tax tends to move capital to be supplied more to non-corporate uses such as housing or partnerships, reducing the return to capital generally, and it moves capital abroad, reducing wages.

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Where the tax incidence falls depends on the price elasticity of demand and price elasticity of supply.

Tax incidence falls mostly upon the group that responds least to price.

The tax incidence is falling on the consumer, known as forward shifting.

Budget Tax incidence represents the combined burden effects of government revenue and government spending.

In some cases, the goal of explanation pursued with budget Tax incidence is too ambitious, and one restricts oneself to a so-called specific Tax incidence.

Differential incidence is particularly useful when examining the impact of tax reforms.

Theory of tax incidence has a large number of practical results, although economists dispute the magnitude and significance of these results:.