Tax incidence refers to how the burden of a tax is distributed from "summary" of Public Finance by Harvey S. Rosen
Tax incidence is a fundamental concept in public finance that plays a crucial role in determining the distribution of the burden of a tax. It refers to the way in which the burden of a tax is spread among various parties in the economy. The key idea is that the entity legally responsible for paying a tax may not necessarily bear the full burden of the tax. In many cases, the burden of a tax is ultimately borne by individuals or groups other than those who are legally required to pay the tax. This is because taxes can have a ripple effect throughout the economy, influencing prices, wages, and other economic variables. As a result, the burden of a tax may be shifted from the party formally responsible for paying the tax to other economic agents. Understanding tax incidence is essential for policymakers and economists because it helps them to assess the distributional implications of different tax policies. By analyzing how the burden o...
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