IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this book chapter or follow this series

Tax incidence

In: Handbook of Public Economics

  • Fullerton, Don
  • Metcalf, Gilbert E.

This chapter reviews the concepts, methods, and results of studies that analyze the incidence of taxes. The purpose of such studies is to determine how the burden of a particular tax is allocated among consumers through higher product prices, workers through a lower wage rate, or other factors of production through lower rates of return to those factors. The methods might involve simple partial equilibrium models, analytical general equilibrium models, or computable general equilibrium models.In a partial equilibrium model, the burden of a tax is shown to depend on the elasticity of supply relative to the elasticity of demand. Partial equilibrium models also are used to consider cases with imperfect competition.In a two-sector general equilibrium model, a tax might be imposed on either commodity, on either factor of production, or on a factor used in one sector. The original use of this model is to analyze the corporate income tax as a tax on capital used only in one sector, the corporate sector. The model can be used to show when the burden falls only on capital or when the burden is shared with labor. The model also has been applied to the property tax, and results of the model have been used to calculate the overall burden on each income group.Because the total stock of capital is fixed in that model, however, dynamic models are required to show how a tax on capital affects capital accumulation, future wage rates, and overall burdens. Such models might also provide analytical results or computational results. The most elaborate recent models calculate the lifetime incidence of each group. Finally, the chapter reviews the use of such incidence methods and results in the policy process.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/B7P63-4FFPH82-5/2/25bd287bf44bcac438f891ca2df22ebd
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

as
in new window

This chapter was published in:
  • A. J. Auerbach & M. Feldstein (ed.), 2002. "Handbook of Public Economics," Handbook of Public Economics, Elsevier, edition 1, volume 4, number 4.
  • This item is provided by Elsevier in its series Handbook of Public Economics with number 4-26.
    Handle: RePEc:eee:pubchp:4-26
    Contact details of provider: Web page: http://www.elsevier.com/wps/find/bookseriesdescription.cws_home/BS_HE/description

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Daniel R. Feenberg & Andrew W. Mitrusi & James M. Poterba, 1997. "Distributional Effects of Adopting a National Retail Sales Tax," NBER Working Papers 5885, National Bureau of Economic Research, Inc.
    2. Anderson, Simon P. & de Palma, Andre & Kreider, Brent, 2001. "Tax incidence in differentiated product oligopoly," Journal of Public Economics, Elsevier, vol. 81(2), pages 173-192, August.
    3. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    4. Don Fullerton, 1995. "Why Have Separate Environmental Taxes?," NBER Working Papers 5380, National Bureau of Economic Research, Inc.
    5. Gilbert E. Metcalf, 2006. "Tax Incidence," Discussion Papers Series, Department of Economics, Tufts University 0607, Department of Economics, Tufts University.
      • Fullerton, Don & Metcalf, Gilbert E., 2002. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 26, pages 1787-1872 Elsevier.
    6. Lyon, Andrew B & Schwab, Robert M, 1995. "Consumption Taxes in a Life-Cycle Framework: Are Sin Taxes Regressive?," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 389-406, August.
    7. Hans Fehr & Laurence J. Kotlikoff, 1995. "Generational Accounting in General Equilibrium," NBER Working Papers 5090, National Bureau of Economic Research, Inc.
    8. Nicholas Bull & Kevin A. Hassett & Gilbert E. Metcalf, 1994. "Who Pays Broad-Based Energy Taxes? Computing Lifetime and Regional Incidence," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 145-164.
    9. Alan J. Auerbach & Laurence J. Kotlikoff & Jonathan Skinner, 1981. "The Efficiency Gains from Dynamic Tax Reform," NBER Working Papers 0819, National Bureau of Economic Research, Inc.
    10. Hamilton, Bruce W, 1976. "Capitalization of Intrajurisdictional Differences in Local Tax Prices," American Economic Review, American Economic Association, vol. 66(5), pages 743-53, December.
    11. McLure, Charles E, Jr, 1970. "Taxation, Substitution, and Industrial Location," Journal of Political Economy, University of Chicago Press, vol. 78(1), pages 112-32, Jan.-Feb..
    12. Metcalf, Gilbert E., 1999. "A Distributional Analysis of Green Tax Reforms," National Tax Journal, National Tax Association, vol. 52(n. 4), pages 655-82, December.
    13. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
    14. Gilbert E. Metcalf & George Norman, 2003. "Oligopoly Deregulation and the Taxation of Commodities," NBER Working Papers 9415, National Bureau of Economic Research, Inc.
    15. Gilbert E. Metcalf, 1993. "The Lifetime Incidence of State and Local Taxes: Measuring Changes During the 1980s," NBER Working Papers 4252, National Bureau of Economic Research, Inc.
    16. Carroll, Robert & Yinger, John, 1994. "Is the Property Tax a Benefit Tax? The Case of Rental Housing," National Tax Journal, National Tax Association, vol. 47(2), pages 295-316, June.
    17. Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-97, September.
    18. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    19. William M. Gentry & R. Glenn Hubbard, 1997. "Distributional Implications of Introducing a Broad-Based Consumption Tax," NBER Chapters, in: Tax Policy and the Economy, Volume 11, pages 1-48 National Bureau of Economic Research, Inc.
    20. Ballard, Charles L. & Fullerton, Don & Shoven, John B. & Whalley, John, 2009. "A General Equilibrium Model for Tax Policy Evaluation," National Bureau of Economic Research Books, University of Chicago Press, edition 0, number 9780226036335.
    21. Grieson, Ronald E., 1975. "The incidence of profits taxes in a neo-classical growth model," Journal of Public Economics, Elsevier, vol. 4(1), pages 75-85, February.
    22. Judd, Kenneth L, 1985. "Short-run Analysis of Fiscal Policy in a Simple Perfect Foresight Model," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 298-319, April.
    23. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
    24. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1991. "Generational Accounts: A Meaningful Alternative to Deficit Accounting," NBER Chapters, in: Tax Policy and the Economy, Volume 5, pages 55-110 National Bureau of Economic Research, Inc.
    25. Joel Slemrod, 1992. "Taxation and Inequality: A Time-Exposure Perspective," NBER Working Papers 3999, National Bureau of Economic Research, Inc.
    26. Aaron, Henry, 1974. "A New View of Property Tax Incidence," American Economic Review, American Economic Association, vol. 64(2), pages 212-21, May.
    27. Poterba, James M., 1996. "Retail Price Reactions to Changes in State and Local Sales Taxes," National Tax Journal, National Tax Association, vol. 49(2), pages 165-76, June.
    28. Delipalla, Sofia & Keen, Michael, 1992. "The comparison between ad valorem and specific taxation under imperfect competition," Journal of Public Economics, Elsevier, vol. 49(3), pages 351-367, December.
    29. Mutti, John & Grubert, Harry, 1985. "The taxation of capital income in an open economy: the importance of resident-nonresident tax treatment," Journal of Public Economics, Elsevier, vol. 27(3), pages 291-309, August.
    30. Alan J. Auerbach & James R. Hines Jr., 2001. "Taxation and Economic Efficiency," NBER Working Papers 8181, National Bureau of Economic Research, Inc.
    31. Timothy J. Besley & Harvey S. Rosen, 1998. "Sales Taxes and Prices: An Empirical Analysis," NBER Working Papers 6667, National Bureau of Economic Research, Inc.
    32. Judd, Kenneth L, 1987. "A Dynamic Theory of Factor Taxation," American Economic Review, American Economic Association, vol. 77(2), pages 42-48, May.
    33. Don Fullerton & Diane Lim Rogers, 1994. "Distributional Effects on a Lifetime Basis," NBER Working Papers 4862, National Bureau of Economic Research, Inc.
    34. Judd, Kenneth L., 1985. "Redistributive taxation in a simple perfect foresight model," Journal of Public Economics, Elsevier, vol. 28(1), pages 59-83, October.
    35. Jane Gravelle & Kent Smetters, 2001. "Who Bears the Burden of the Corporate Tax in The Open Economy?," NBER Working Papers 8280, National Bureau of Economic Research, Inc.
    36. James M. Poterba, 1989. "Lifetime Incidence and the Distributional Burden of Excise Taxes," NBER Working Papers 2833, National Bureau of Economic Research, Inc.
    37. Laurence J. Kotlikoff, 2001. "Generational Policy," NBER Working Papers 8163, National Bureau of Economic Research, Inc.
    38. Alan J. Auerbach, 2005. "Who Bears the Corporate Tax? A review of What We Know," NBER Working Papers 11686, National Bureau of Economic Research, Inc.
    39. Gordon, Roger H & Slemrod, Joel, 1983. " A General Equilibrium Simulation Study of Subsidies to Municipal Expenditures," Journal of Finance, American Finance Association, vol. 38(2), pages 585-94, May.
    40. Aaron, Henry J, 1989. "Politics and the Professors Revisited," American Economic Review, American Economic Association, vol. 79(2), pages 1-15, May.
    41. Mark McClellan & Jonathan Skinner, 1997. "The Incidence of Medicare," NBER Working Papers 6013, National Bureau of Economic Research, Inc.
    42. Fullerton, Don & Rogers, Diane Lim, 1997. "Neglected Effects on the Uses Side: Even a Uniform Tax Would Change Relative Goods Prices," American Economic Review, American Economic Association, vol. 87(2), pages 120-25, May.
    43. Suits, Daniel B, 1977. "Measurement of Tax Progressivity," American Economic Review, American Economic Association, vol. 67(4), pages 747-52, September.
    44. Bernheim, B Douglas, 1981. "A Note on Dynamic Tax Incidence," The Quarterly Journal of Economics, MIT Press, vol. 96(4), pages 705-23, November.
    45. Feldstein, Martin S, 1974. "Incidence of a Capital Income Tax in a Growing Economy with Variable Savings Rates," Review of Economic Studies, Wiley Blackwell, vol. 41(4), pages 505-13, October.
    46. Karp, Larry S & Perloff, Jeffrey M, 1989. "Estimating Market Structure and Tax Incidence: The Japanese Television Market," Journal of Industrial Economics, Wiley Blackwell, vol. 37(3), pages 225-39, March.
    47. McLure, Charles E, Jr, 1974. "A Diagrammatic Exposition of the Harberger Model with One Immobile Factor," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 56-82, Jan.-Feb..
    48. Richard Harris, 1983. "Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition," Working Papers 524, Queen's University, Department of Economics.
    49. Davies, James B & St-Hilaire, France & Whalley, John, 1984. "Some Calculations of Lifetime Tax Incidence," American Economic Review, American Economic Association, vol. 74(4), pages 633-49, September.
    50. Zodrow, George R., 2001. "The Property Tax as a Capital Tax: A Room with Three Views," National Tax Journal, National Tax Association, vol. 54(n. 1), pages 139-56, March.
    51. Oates, Wallace E, 1969. "The Effects of Property Taxes and Local Public Spending on Property Values: An Empirical Study of Tax Capitalization and the Tiebout Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 77(6), pages 957-71, Nov./Dec..
    52. Brittain, John A, 1971. "The Incidence of Social Security Payroll Taxes," American Economic Review, American Economic Association, vol. 61(1), pages 110-25, March.
    53. Karen Eggleston, 2001. "Multitasking, Competition and Provider Payment," Discussion Papers Series, Department of Economics, Tufts University 0101, Department of Economics, Tufts University.
    54. David Altig, 2001. "Simulating Fundamental Tax Reform in the United States," American Economic Review, American Economic Association, vol. 91(3), pages 574-595, June.
    55. Hines, James Jr. & Hlinko, John C. & Lubke, Theodore J. F., 1995. "From each according to his surplus: Equi-proportionate sharing of commodity tax burdens," Journal of Public Economics, Elsevier, vol. 58(3), pages 417-428, November.
    56. CREMER, Helmut & THISSE, Jacques-François, 1992. "Commodity taxation in a differentiated oligopoly," CORE Discussion Papers 1992035, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    57. Mieszkowski, Peter, 1972. "The property tax: An excise tax or a profits tax?," Journal of Public Economics, Elsevier, vol. 1(1), pages 73-96, April.
    58. Lawrence H. Summers, 1984. "The Asset Price Approach to the Analysis of Capital Income Taxation," NBER Working Papers 1356, National Bureau of Economic Research, Inc.
    59. Bradford, David F., 1978. "Factor prices may be constant but factor returns are not," Economics Letters, Elsevier, vol. 1(3), pages 199-203.
    60. Laurence J. Kotlikoff & Lawrence H. Summers, 1986. "Tax Incidence," NBER Working Papers 1864, National Bureau of Economic Research, Inc.
      • Kotlikoff, Laurence J. & Summers, Lawrence H., 1987. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 16, pages 1043-1092 Elsevier.
    61. Stern, Nicholas, 1987. "The effects of taxation, price control and government contracts in oligopoly and monopolistic competition," Journal of Public Economics, Elsevier, vol. 32(2), pages 133-158, March.
    62. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70, pages 215.
    63. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
    64. Feldstein, Martin S, 1977. "The Surprising Incidence of a Tax on Pure Rent: A New Answer to an Old Question," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 349-60, April.
    65. Gruber, Jonathan, 1997. "The Incidence of Payroll Taxation: Evidence from Chile," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S72-101, July.
    66. Besley, Timothy, 1989. "Commodity taxation and imperfect competition : A note on the effects of entry," Journal of Public Economics, Elsevier, vol. 40(3), pages 359-367, December.
    67. Browning, Edgar K, 1993. "Transfers and Tax Incidence Theory," Public Finance = Finances publiques, , vol. 48(1), pages 138-41.
    68. Devarajan, Shantayanan & Fullerton, Don & Musgrave, Richard A., 1980. "Estimating the distribution of tax burdens : A comparison of different approaches," Journal of Public Economics, Elsevier, vol. 13(2), pages 155-182, April.
    69. McLure, Charles Jr., 1975. "General equilibrium incidence analysis : The Harberger model after ten years," Journal of Public Economics, Elsevier, vol. 4(2), pages 125-161, February.
    70. Fullerton, Don & Rogers, Diane Lim, 1991. "Lifetime Versus Annual Perspectives on Tax Incidence," National Tax Journal, National Tax Association, vol. 44(3), pages 277-87, September.
    71. Boadway, Robin, 1979. "Long-run Tax Incidence: A Comparative Dynamic Approach," Review of Economic Studies, Wiley Blackwell, vol. 46(3), pages 505-11, July.
    72. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-51, September.
    73. Vandendorpe, Adolf L. & Friedlaender, Ann F., 1976. "Differential incidence in the presence of initial distorting taxes," Journal of Public Economics, Elsevier, vol. 6(3), pages 205-229, October.
    74. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    75. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 217-35, June.
    76. Jagadeesh Gokhale & Benjamin R. Page & John Sturrock, 1999. "Generational Accounts for the United States: An Update," NBER Chapters, in: Generational Accounting around the World, pages 489-518 National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:pubchp:4-26. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.