8.2 Income Taxes and Social Security Taxes
MyEconLab Concept Video
Income taxes and Social Security taxes raise two-thirds of total U.S. government revenue (see Eye on the U.S. Economy on next page). Who pays these taxes? Are they efficient? Let’s find out.
The Effects of the Income Tax
An income tax is a tax on the sellers of the services of the factors of production—labor, capital, and land. You’ve just seen that who pays a tax—the incidence of a tax—depends on the elasticities of demand and supply. These same elasticities also influence the inefficiency created by a tax.
The elasticities of demand and supply are different for each factor of production, so to determine the incidence and inefficiency of an income tax, we must examine its ...
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