ABSTRACT
Down to 1927 it was generally held by economists that the incidence of a tax on income is not shifted but remains where it has been placed. Such a tax, they believed, leaves the prices of commodities and the rewards of the factors of production, at the same levels as it had found them. The theory that the economists had put forward can be summarised as follows, in a way which shows the relationship between its different parts. There are three arguments in the theory. The first argument, as the economists who use it are careful to point out, only applies to the case of a general income tax, which is imposed on all branches of industry. Second, the Marginal Firm or No-Profits Firm argument is stated by Seligman as follows: the question [is] how the marginal producer, the producer at the margin, is affected. Third, the Marginal Unit argument of this theory completes the proof.
