Economist and social reformer Henry George rejected sales taxes and protective tariffs because of their negative impact on trade. [98] He also believed in the right of every human being to the fruits of his own labor and productive investment. Therefore, labour income and equity should not be taxed. For this reason, many geoists – especially those who call themselves lonely – share the opinion with libertarians that these types of taxation (but not all) are immoral and even stolen. George explained that there should be only one tax: the property value tax, which is considered both effective and moral. [97] Demand for some areas depends on nature, but even more so on the presence of communities, trade, and state infrastructure, especially in urban areas. Therefore, the economic rent of the land is not the product of a particular person and can be claimed for public expenditure. According to George, this would end housing bubbles, business cycles, unemployment and distribute wealth much more evenly. [97] Joseph Stiglitz`s Henry George theorem predicts that it is enough to finance public goods because they increase the value of land. [99] Panels (c) and (d) of the exhibition show the same tax levied on markets with identical supply curves S1.
With a relatively elastic demand curve D1in panel (c) (note that we are in the top half, i.e. in the elastic part of the curve), most of the tax burden is borne by sellers. With a relatively inelastic demand curve D1in panel (d) (note that we are in the lower half, i.e. in the inelastic part of the curve), most of the load is borne by buyers. When demand is relatively elastic, sellers bear a greater share of the tax burden. When demand is relatively inelastic, buyers bear more of the burden. In economics, the tax incidence or tax burden is the effect of a particular tax on the distribution of economic well-being. Economists distinguish between companies that ultimately bear the tax burden and those that are initially subject to tax.
The tax burden measures the actual economic weight of the tax, measured by the difference between real income or utilities before and after the tax is collected, taking into account how the tax causes price changes. For example, if a 10% tax is levied on butter sellers, but the market price increases by 8%, the heaviest burden falls on the buyers, not the sellers. The concept of tax incidence was first brought to the attention of economists by French physiocrats, in particular François Quesnay, who argued that the impact of all taxes ultimately falls on landowners and is to the detriment of the land lease. It is said that the tax impact « falls » on the group that ultimately bears the tax burden or ultimately suffers a loss. The key concept of tax incidence (as opposed to tax level) is that the tax incidence or burden does not depend on where revenues are collected, but on the price elasticity of demand and the price elasticity of supply. In general, the tax impact should not violate the principles of a desirable tax system, in particular fairness and transparency. [1] The concept of tax incidence is used in political science and sociology to analyze the level of resources extracted from each social income bracket in order to describe how the tax burden is distributed among social classes. This makes it possible to draw some conclusions about the progressive nature of the tax system according to the principles of vertical justice. [2] Depending on how the quantities supplied and demanded vary with the price (the « elasticities » of supply and demand), a tax may be absorbed by the seller (in the form of lower pre-tax prices) or by the buyer (in the form of higher after-tax prices). If the elasticity of supply is low, more of the tax is paid by the supplier.
If the elasticity of demand is low, the customer pays more; and vice versa for cases where these elasticities are high. If the seller is a competitive enterprise, the tax burden is distributed among the factors of production according to their elasticities; These include workers (in the form of lower wages), investors (in the form of losses to shareholders), landowners (in the form of lower rents), contractors (in the form of lower supervisory wages), and customers (in the form of higher prices). In a regressive tax system, people in the bottom quintiles face the highest tax rates. A proportional system imposes the same rates on all; A progressive system imposes higher rates on people in the top deciles. The table provides CBO estimates of the burden of each federal tax quintile in 2006. As you can see, the tax structure in the United States is progressive. where Fiscal Freedomij represents the tax exemption in country i for factor j; Factorij represents the value (based on a scale from 0 to 100) in country i for the factor j; and α is a coefficient equal to 0.03. The minimum score for each factor is zero, which is not represented in the printed equation, but was used because it means that no high tax burden makes the other two factors irrelevant. Figure 15.3 Tax incidence and elasticity of supply and demand We show the effect of an excise duty, given by the vertical green line, in the same way as in Figure 15.2. We find that buyers bear most of the burden of such a tax in cases of relatively elastic supply (panel (a)) and relatively inelastic demand (panel (d)). Sellers bear most of the burden in cases of relatively inelastic supply (panel (b)) and relatively elastic demand (panel (c)). An important feature of tax systems is the percentage of the tax burden in relation to income or consumption.
The terms progressive, regressive and proportional are used to describe how the rate moves from bottom to top, from top to bottom or proportionally. The terms describe a distributive effect that can be applied to any type of tax system (income or consumption) that meets the definition. The terms can also be used to apply meaning to the taxation of certain consumptions, such as a luxury goods tax and the basic needs exemption, as they increase the tax burden on high-end consumption and reduce the tax burden for low-end consumption. [21] [22] [23] The point on the initial supply curve in relation to the quantity of the goods after taxation represents the price (from which the part of the tax is deducted ( p 0 − ( 1 − k ) t ), k ∈ [ 0 , 1 ] ) {displaystyle (p_{0}-(1-k)t),kin [0,1])}, which manufacturers receive in a certain quantity. In this case, the tax burden is borne equally by producers and consumers. For example, if the initial price of the good is $2 and the tax levied on production is $0.40, consumers can buy the good for $2.20 while producers receive $1.80. Compared to previous phenomena, the elasticity of the supply and demand curve is an essential characteristic that predicts how much consumers and producers will be burdened in the specific case of taxation. In general, the steeper the demand curve and the flatter the supply curve, the more consumers will bear the tax. The flatter the demand curve and the steeper the supply curve, the more producers will bear the tax.
[7] It`s important to remember that every dollar you pay in taxes starts as a dollar earned as income. One of the main differences between the types of taxes described below is the time of collection – in other words, when you pay the tax. Because GRTs are taxed at every stage of the production chain, they lead to a « tax pyramid » in which the tax burden multiplies throughout the production chain and is ultimately passed on to consumers. Some types of taxes have been proposed, but have not been adopted in major jurisdictions. These questions relate to tax impact analysis, a type of economic analysis that aims to determine where the actual burden of a tax lies. Is the burden on consumers, workers, owners of capital, owners of natural resources or owners of other assets in the economy? When a tax levied on a good or service increases the price of the amount of the tax, the burden of the tax falls on the consumers. Instead, if wages are lowered or prices are lowered for some of the other factors of production used in the production of the taxed good or service, the burden of taxation falls on the owners of those factors. If the tax does not change the price or the prices of the factors of the product, the burden falls on the owner of the company – the owner of the capital. If prices adjust by a fraction of the tax, the burden is shared. Many documents on the collection of state taxes in Europe since at least the 17th century are still available today.
But the level of taxation is difficult to compare with the size and flow of the economy, as production figures are not so readily available. Government expenditure and revenue in France in the 17th century rose from about £24.30 million in 1600-10 to about £126.86 million in 1650-59 to around £117.99 million in 1700-10, when the national debt had reached £1.6 billion. In 1780-89 it reached 421.50 million pounds. [38] Taxation as a percentage of finished product production may have reached 15-20% in countries such as France, the Netherlands and Scandinavia in the 17th century.
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