The Economic Incidence of Supply and Demand Changes
Application: Taxation
- Depressions and recessions make taxpayers question what they value
- Prohibition failed during the Great Depression because a great percentage of tax revenue came from the liquor tax; revenues trumped drinking dangers
- Excise Tax: the legal respnsiblity of the the tax is on the seller
- supply taxed shifts in parallel to original supply
- price does not increase by the amount of the tax
- drives a wedge between the price buyers are wiling to pay and the price sellers are willing to sell
- because the tax is greater than possible transactions, those transactions wouldn't have happened
- Tax Evasion increases the costs associated with taxation
No comments:
Post a Comment