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In economics, tax incidence or tax burden is the effect of a particular tax on the distribution of economic welfare. Economists distinguish between the entities who ...
The economic incidence of a tax falls on the party that bears the actual cost of the tax. Put another way, economic incidence reflects the actual change in an individual's or firm's resources due to the tax. [2] The statutory incidence of the tax is irrelevant to the economic incidence of the tax. [2] In fact, the economic incidence is ...
In their economics textbook Principles of Economics (7th edition), economists Karl E. Case of Wellesley College and Ray Fair of Yale University state "The Laffer curve shows the relationship between tax rates and tax revenues. Supply-side economists use it to argue that it is possible to generate higher revenues by cutting tax rates, but ...
The effect of this type of tax can be illustrated on a standard supply and demand diagram. Without a tax, the equilibrium price will be at Pe and the equilibrium quantity will be at Qe. After a tax is imposed, the price consumers pay will shift to Pc and the price producers receive will shift to Pp. The consumers' price will be equal to the ...
English: A diagram showing the incidence of tax of consumers and producers where supply and demand are neither very inelastic nor very elastic. Date 4 January 2010, 14:26 (UTC)
Diagram illustrating deadweight costs of taxes. In the absence of negative externalities, the introduction of taxes into a market reduces economic efficiency by causing deadweight loss. In a competitive market, the price of a particular economic good adjusts to ensure that all trades which benefit both the buyer and the seller of a good occur ...
Tax incidence of indirect taxes is not clear, in fact, statutory (legal) incidence in most cases tells us nothing about economic (final) incidence. [9] The incidence of indirect tax imposed on a good or service depends on price elasticity of demand (PED) and price elasticity of supply (PES) of a concerned good or service. In case the good has ...
As a result, the distribution of tax burdens and government expenditure benefits is an important economic question to those concerned with the equity of the fiscal system. When the economic incidence of taxation is combined with the economic incidence of government expenditures, the result is a measure of the overall increase or decrease in ...