Tax shifting occurs when some of a tax collected by one side of a market, such as a seller, is paid by the other side, such as a buyer. This can happen when sellers increase the price of their goods or services in response to the tax, and buyers end up paying a higher price that includes the tax.

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Tax Shifting

Question 65

Multiple Choice

Tax shifting

A) is the process by which buyers pass a tax onto sellers
B) is the process that causes some of a tax collected by one side of a market to be paid by the other side
C) is the process of avoiding taxes and lowering a tax burden
D) is a way of avoiding payment of a tax
E) is illegal in the United States

Correct Answer: