18.6 The Appropriate Unit of Taxation . . . . . . . . . . . . . . . .

550
The Problem of the Marriage Tax 550
Marriage Taxes in Practice 552

18.7 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 554

Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 554

Questions and Problems . . . . . . . . . . . . . . . . . . . . . . . . . . 555

Advanced Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 556

CHAPTER 19 The Equity Implications of Taxation:

Tax Incidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557
19.1 The Three Rules of Tax Incidence . . . . . . . . . . . . . . . . 559
The Statutory Burden of a Tax Does Not Describe Who Really
Bears the Tax 559
The Side of the Market on Which the Tax Is Imposed Is Irrelevant to the
Distribution of the Tax Burdens 561
Parties with Inelastic Supply or Demand Bear Taxes;
Parties with Elastic Supply or Demand Avoid Them 564
Reminder: Tax Incidence Is About Prices, Not Quantities 567

19.2 Tax Incidence Extensions . . . . . . . . . . . . . . . . . . . . . 568

Tax Incidence in Factor Markets 568
Tax Incidence in Imperfectly Competitive Markets 572
Balanced Budget Tax Incidence 574

19.3 General Equilibrium Tax Incidence . . . . . . . . . . . . . . . . 575

Effects of a Restaurant Tax: A General Equilibrium Example 575
Issues to Consider in General Equilibrium Incidence Analysis 577

19.4 The Incidence of Taxation in the United States . . . . . . . . 580

CBO Incidence Assumptions 580
Empirical Evidence: The Incidence of Excise Taxation 581
Results of CBO Incidence Analysis 581
Current Versus Lifetime Income Incidence 584

19.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584

Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585

Questions and Problems . . . . . . . . . . . . . . . . . . . . . . . . . . 585

Advanced Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 586

APPENDIX TO CHAPTER 19 The Mathematics of Tax Incidence . . . . 587

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