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The corporate income tax provides a good example of the importance of tax incidence for tax policy. The corporate tax is popular among voters. After all corporations are not people. Voters are always eager to have their taxes reduced and have some impersonal corporation pick up the tap.  But before deciding that the corporate income tax is a good way for the government to raise revenue we should consider who bears the burden of the corporate tax. This is difficult question on which economists disagree but one thing is certain people pay all taxes. When the government levies a tax on a corporation the corporation is more like a tax collector than a taxpayer. The burden of the tax ultimately falls on people the owners customers or workers of the corporation.  Many economists believe that workers and customers bear much of the burden of the corporate income tax. To see why consider an example. Suppose that the U.S government decides to raise th

Much debate over tax policy concerns whether the wealthy pay their fair share. There is no objective way to make this judgment. In evaluating the issue for yourself however it is useful to know how much families with different incomes pay under the current tax system.  Table 8 presents some data on how all federal taxes are distributed among income classes. To construct this table families are ranked according to their income and placed into five groups of equal size called quintiles. The table also presents data on the richest one percent of Americans. Studies that include both taxes and transfer show more progressivity. The richest group of families still pays about one quarter of its income to the government even after transfer are subtracted. By contrast poor   families typically receive more in transfer than they pay in taxes. The average tax rate of the poorest quintile rather than being 5.5 percent as in the table is approximately negat