Tax incidence

Something that certain people would do well to remember:

In general, the lesson from the above analysis is that tax burdens always tend to get shifted onto
whoever has the fewest options—a result that is often at odds with the intention of lawmakers
crafting tax policy.

2 thoughts on “Tax incidence”

  1. Correct. There’s supply and demand, and the tax is borne by whichever side is less price elastic.

    Tobacco duty – paid by smokers (because demand is very price-inelastic).
    Land value tax – paid by land owners (because supply is completely price-inelastic).

    Interestingly, these two extreme cases are the least bad kind of tax, and with land, you don’t even need to worry about smuggling etc.

    Everything in between, where supply and demand are both price-elastic tend to be very damaging taxes, economically speaking. So VAT is probably the worst tax.

  2. Something that certain people would do well to remember
    Aye? What? Whoever can you be speaking about? :-)7

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