Talk:Tax incidence

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I completely rewrote this article because it was both incorrect and offtopic. If you have comments, please make them! Mgunn 11:37, 19 December 2006 (UTC)

Wow - nice job.. I'll try to read through it later this week. I added some of the "See also" back in. Morphh (talk) 19:17, 19 December 2006 (UTC)

This article has a narrow perspective now, though the quality of the present article is quite good. Tax incidence is not just an economic term to describe the way in which employers and employees bear the burden of taxation, but in a broader perspective, the way taxes are distributed among social classes or economic groups. It's not just about the efficiency issue or the effects of taxation on wages and employment. It's also a crucial concept in political economy to understand the way the process of state-building was managed in the past: its winners and losers. I think that the article would be better including a section reviewing that literature on political economy and the politics of income distribution, imho. --poldavo 03:01, 29 January 2007 (UTC)

Sorry, I didn't realize that there is a process of merging and splitting articles to fill that article with the appropiate contents I was talking about in my previous comment. I find very adequate to incluide those general observations about progressive and regressive taxation inside that article. I will try to help with that. --poldavo 03:09, 29 January 2007 (UTC)


[edit] Reference

Using The Heritage Foundation, a conservative think tank, as a neutral reference may actually not be useful at all. Besides, who states the following: "Eventually, the tax incidence falls to the citizens in forms such as higher prices, lower wages, increased unemployment, decreased quality of goods, etc."? I see no valid reference. It is POV and not fact. Different taxes works differently; excise tax falls to the one buying cigarettes/alcohol/et.c, for example. Income tax may in specific cases "go backward" and require higher salary from the employer. The capitalist could be forced to cut his revenue, and last but not least: the state (or other collector of tax) will spend the tax money on something and very well DECREASE unemployment in some scenarios (for example employing people in the public sector, e.g. nurses to a public hospital, or buying goods and services from private companies). Kricke (talk) 22:15, 22 January 2008 (UTC)
Sources do not need to be neutral, only the presentation of the content. I'd even say it is important to have multiple biased sources from each POV, so long as they are reliable per policy. Just about every source has bias, our job is to try and present all sides and present it neutrally. I agree that a source should be found for the statement but it is the common viewpoint. Your examples still fall to citizens in some way. Businesses don't pay taxes, people do - they have revenue and expenses - taxes are an expense and offset like any expense, with higher prices, decreased investor returns, lower wages - it all falls to the individual(s). Excises fall to the purchaser of cigarettes - a citizen. Higher salary from the employer - a citizen. The captitalist could be forced to cut his revenue - a citizen. Organizations are made up of people, so at some point the incidence ultimatly falls to an individual - the worker, the buyer, the owner, the investor. This is often stated broadly as the buyer, worker, or producer and incidence can be split among any combination. While the state can certainly employee people with tax dollars, this is not what is considered in tax incidence. Perhaps this can be reworded in some way. I understand the point that is being made, just not sure how best to rephrase it. Morphh (talk) 3:49, 23 January 2008 (UTC)
You're right about sources, they don't have to be neutral if the purpose is to show the views of a particular political group, for example. But that depends on how it is used in the article. It should not be stated in a "fact-like" way. Kricke (talk) 11:29, 24 January 2008 (UTC)
You are also right that everything is payed by "a citizen" one way or another, by definition, because there are no other legal entities that counts. The statement, however, gives the reader the notion that "you will have to pay for all taxes", because it says "the citizens" (which includes everyone - and that is not a meaningful "group of people" when analyzing tax incidence), and the examples "higher prices, lower wages, increased unemployment" is biased, examples on things that everyone dislikes. It gives the reader the notion that all taxes misses the "intended one", and is payed by someone else, which is not true. Not all taxes create incidence (in a meaningful manner). I think that tax incidence can be used in two ways 1) to analyze who is actually paying for a tax, in order to get the intended "effect" of a particular tax 2) propaganda to lower the taxes, by using "tax incidence" look like a scientific way of saying that "you (even the poorest) are paying for this tax, and you will benefit of an overall reduction of taxes (even the richest)". The second should not be used in wikipedia, in my opinion. Kricke (talk) 11:30, 24 January 2008 (UTC)
And does not "tax incidence" also cover "who benefits from a reduction of a tax?" In Sweden, the government lowered VAT on books from 25% to 6%, in order to increase book-reading (or something like that). However, prices did not drop equally much, and bookstore keepers (probably) made a higher profit instead. Is this not the same thing, but "negative"? Kricke (talk) 11:30, 24 January 2008 (UTC)
I see what your saying and we should try to reword it to describe a meaningful group. I think the intent is to say that the incidence does not fall to the "business" as, like you stated, there are no other legal entities that count. It falls to a group of individuals and they may be the consumers, workers, or investors. With regard to the examples, it is mainly talking about business examples and I'm not sure what other outlets there are. What would be an example that people "like"? Taxes can be used for social engineering - some people may like that tobacco is priced higher due to taxes to reduce consumption. However, this outlet is still limited - a business only has so many things that it can do to pay for the expenditure. People may like where the incidence falls or the effect but I'm not sure if that is the same thing as an example of where such incidence can be placed in a business. I think if tax incidence is used in either #1 or #2 in a way that is significant, then we should include it in the article in a balanced way. I'd say #2 (class warfare in many cases) is used more often than #1. As for your last example, I would say that it describes where the incidence fell, as once the tax was removed, you could see lower prices (the incidence that fell to the consumer), which should follow supply and demand economics. The rest fell on the producer, in the form of reduced revenue. Once the tax was removed, the increase in capital could have been used for new business investments, paying off debt, increased inventory, increasing wages (to the owner or workers), etc. I think this is an example of tax incidence. Morphh (talk) 16:13, 24 January 2008 (UTC)
Another thing: I created the Swedish Wikipedia stub for this article. When I did, I did a small research, looking for example at Skatteverket's info (the Swedish equivalent of IRS) and some papers from Swedish universities, and they generally seem to define tax incidence as both intentional, i.e. indirect tax (like VAT and excise tax, in normative use) as well as unintentional effects. This article seem to only focus on unintentional effects? Perhaps there is a difference in definition in different countries, like the article on indirect tax mentions. Anyway, in Sweden, it seems "indirect tax" is intentional tax incidence in general use. If this is true for other countries >(I don't know), it should perhaps mention this? Kricke (talk) 20:45, 25 January 2008 (UTC)
Not sure, what is meant by unintentional and what is the difference between intentional and unintentional in what you read? You could intend for a tax to apply to one group but it then falls onto another, but that seems to be what is described by tax incidence - it shows where it falls regardless of intentions. I think intentions would be a form of politics. In most cases, I'd expect that the group taxed is the intended target of the tax - personal income taxes do a good job of this. So tax incidence (the reality of the burden) lines up with the intentions and there are no unintentional burdens. So I could see tax incidence being used to show intended and unintended effects of taxes but I don't know that tax incidence itself falls into such categories as it is the only the study of where a tax burden falls, or at least it is to my understanding.. but I could be incorrect. Morphh (talk) 20:58, 25 January 2008 (UTC)
You are correct, but here is what they say: They firstly draw a line between direct and indirect taxes (admittedly quite arbitrary, in some cases). The (normative) definition they use is: Direct taxes = income tax et.c, when the "by law" taxed person/company is meant to bear the burden (even if the employer, or bank if it is tax on interest, do the actual money transfer). Indirect tax = VAT, tobacco/alcohol tax, et.c, the "by law" taxed person/company is supposed to shift the burden on to someone else (the smoker, the consumer et.c). The idea of alcohol-tax may be to increase prices so that people don't drink as much. This is an intentional tax incidence. However, even direct taxes can have incidence, which is then unintentional. The study of tax incidence, of course, handle all forms of such. But the article could mention this difference, that some incidence is supposed to happen (indirect taxes) and some are not (direct taxes that is passed on to someone else). However, there may be a situation when cigarettes becomes to expensive because of the tax, so that people stop smoking if the producer don't lower its revenue, and then there is an unintended "direct tax" too. :) The point is that the examples under "Other practical results" all handle unintentional effects, and they are a bit "anti tax" biased and they don't have any references. All the examples is "fact like", and states that everything is passed onto the employee, car owner et.c, even that it is not certain (it depends on the market situation). Kricke (talk) 21:59, 25 January 2008 (UTC)