Tuesday, June 24, 2008

What if burden equaled incidence?

In writing this week's column, I want to offer the following question:

Would there be any value in assigning the incidence of the tax to match the burden of the tax?

Obviously, tax burden will be different for each individual and for each good at every point in time, so you can't ever get it exactly right but it could be estimated closer-- let's say the sales tax become 50% you pay it at the register/50% the company pays after the fact. Would there be any effects from this? Clearly, theory dictates that incidence is independent of burden...but it is in actuality? Could we see some "irrational" response to this? My mind is spinning all over this possibility; I'm curious to see what anyone else has to say.


Justin M Ross said...

Ok, I've thought about it enough now, and my feeling is that it would be politically unpopular. Because the incidence falls more proportionally to the more inelastic group, they would feel like they are being picked on because of their limited ability to change behavior. My prediction is then that the statutory incidence falls on the side of the market that has less economic incidence.

Anonymous said...

I've been trying to setup a blog just like yours, can you tell me how you managed it?
I don't I'll be posting much more here for a while. But then again, I have no idea when I would want to be random again.
How do I promote my website?
How do people blog on other people's blogs? Can I guest post on your site, I have lots of interesting articles.

Everybody lies; but it doesn't matter much since nobody listens.