ABSTRACT
The analysis of tax incidence is concerned with the redistributive effects of taxation among individuals or groups of individuals in society. The identity of these groups is determined by the nature of the tax and the interests of the researcher, but generally individuals are grouped according to factor ownership, level of income, commodity preference or other such distinction. While the term incidence is often used to refer to the “primary” burden of the tax, this can lead to the erroneous conclusion that the effect of a tax on a particular group’s income lies between 0 and 100 percent of the tax proceeds. In fact, the total distributive consequences of a tax depend on how the tax affects relative prices, particularly factor returns, and the distributive effect on a given group can exceed 100 percent or be less than 0 percent of the tax proceeds, the latter being a case where the group gains as a result of the tax. 1
