Tax incidence

(Sometimes called tax burden) When an indirect tax is placed on a particular good or group of goods, the incidence, or burden, of the tax is shared by producers and consumers. Buyers will pay a higher price, thus share some of the burden of the tax. But once the tax has been paid to the government, producers end up keeping a lower price, meaning they also share some of the tax burden. The amount of a tax on a particular good paid by consumers is the consumer tax incidence; the amount paid by producers is the producer tax incidence.

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