L7: Tax Incidence

Question 1

tax incidence

Answer 1

assessment of which party or parties bear the true burden of a tax

Question 2

statutory incidence

Answer 2

legal liability for payment of a tax

Question 3

economic incidence

Answer 3

burden of taxation measured by the change in the resources available to any economic agent as a result of taxation

not only tax payments but also associated changes in prices caused by the tax

Question 4

key point with tax incidence

Answer 4

taxes can be shifted and borne by someone other than the party paying the tax because of changing pirces

Question 5

partial equilibrium analysis

Answer 5

analysis based only on the single market directly affected by a tax

Question 6

elasticity

Answer 6

% change in quantity when price changed by 1%

Question 7

tax incidence with perfectly inelastic demand

Answer 7

producers bear none of the tax and consumers bear all the tax

Question 8

tax incidence with perfectly elastic demand

Answer 8

producers beat all of the tax and consumers bear none of the tax

Question 9

basic lesson with incidence

Answer 9

side of the market that is more flexible in terms of leaving the market is the one which bears less of the tax

not absolute but relative elasticity

Question 10

general equilibrium tax incidence

Answer 10

analysis that considers the effects on related markets of a tax imposed on one market

Question 11

congressional budget office incidence assumptions

Answer 11

income taxes are borne fully by households paying them

payroll taxes are borne fully by workers

excise taxes are fully shifted to prices so they are borne by individuals

corporate taxes are borne 25% by workers and 75% by owners of capital
- only people can bear taxes

Question 12

current tax incidence

Answer 12

incidence of a tax in relation to an individual’s current resources

Question 13

lifetime tax incidence

Answer 13

incidence of a tax in relation to an individual’s lifetime resources