Public Finance, 3rd Edition

Measuring Tax Incidence: A Many-Consumer Economy

Our discussion of tax incidence measures and methodology in a one-consumer economy is all preliminary. Tax incidence theory is ultimately concerned with the relative burdens from taxation suffered by various consumers or groups of consumers within the economy. As such, it requires analysis within the context of a many-person consumer economy.

Unfortunately, it is not entirely clear how to conceptualize a valid incidence analysis for the many-person economy. There is, at the outset, a fundamental and ambiguous issue centered around the question of point of view: What matters to incidence theory in a many-person economy—the losses suffered by each of the (H) consumers in the economy as individually ...