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However, some economists think that the worker bears almost the entire burden of the tax because the employer passes the tax on in the form of lower wages. The tax incidence is thus said to fall on the employee. [3] However, it could equally well be argued that in some cases the incidence of the tax falls on the employer.
The flypaper theory of tax incidence is a pejorative term used by economists to describe the assumption that the burden of a tax, like a fly on flypaper, sticks wherever it first lands. Economists point out several flaws with the assumption: [citation needed] it ignores the elasticity of goods; and
In the pre-tax equilibrium the distance equals $5.00 x 0.20 = $1.00. This burden of the tax is again shared by the buyer and seller. If the new equilibrium quantity decreases to 85 and the buyer bears a higher proportion of the tax burden (e.g. $0.75), the total amount of tax collected equals $1.00 x 85 = $85.00.
For example, the Australian Bureau of Statistics periodically produces empirical estimates of the net fiscal incidence of Australia's overall government operations. The United Kingdom 's Office for National Statistics also produces regular estimates of the impact of government taxes and spending on household income.
Some people may move out of the work force (to avoid income tax); some may move into the cash or black economies (where incomes are not revealed to the tax authorities). [citation needed] For example, in Western nations the incomes of the relatively affluent are taxed partly to provide the money used to assist the relatively poor.
For example, if there is one social good and two taxpayers (A and B), their demand for social goods is represented by a and b; therefore, a+b is the total demand for social goods. The supply curve is shown by a'+b', indicating that goods are produced under conditions of increasing cost.
Running a business highlights the complexity of the tax code, making deferred tax assets (DTAs) challenging yet essential for minimizing tax liability.
Tax incidence is included in the JEL classification codes as JEL: H22. Pages in category "Tax incidence" The following 20 pages are in this category, out of 20 total.