Determination of the incidence of a tax:
A)is not required when one is only interested in issues of equity
B)is identical to the determination of legal liability for a tax
C)requires one to evaluate where the tax burden eventually falls
D)is solely determined by conditions of the 'flypaper theory' of taxation

Question

Quizplus · Accepted Answer

In order to determine the incidence of a tax, one must evaluate where the burden of the tax falls. This involves looking at factors such as the elasticity of supply and demand, the behavior of buyers and sellers, and the overall market conditions. It is not identical to the determination of legal liability for a tax, which is based on factors such as income or property ownership. The incidence of a tax is also not solely determined by the 'flypaper theory' of taxation, which suggests that taxes stick to the first object they touch (such as a consumer or producer). Therefore, choice C is the best answer. Choice A is incorrect because issues of equity can be affected by the incidence of a tax, but determining incidence is still necessary. Choice B is incorrect for the reasons mentioned above, and Choice D is incorrect because the 'flypaper theory' is just one of many factors that can affect tax incidence.

Determination of the Incidence of a Tax