Employees, economists, and limits to those insights were not agreed upon by economists.
Economists' shareholders would benefit from the tax because corporations don't pay tax.
This was different by industry.
In the opening of the chapter, I stated that taxes are hot consumers would get little of the tax cut because their potatoes were passed off to someone else as quickly as possible.
The shareholders would ble.
For the corporate income tax, this means that the tax get a significant portion, although in a number of indus will be paid by some combination of shareholders, em tries workers would benefit as wel, in part because the ployees, and consumers, with the burden paid by each
One can't analyze paid tax, but whether the tax was paid at all.
Corporations can avoid income taxes by moving to another country or structuring their business so that the impact of the tax cut is not felt in the economy.
Other countries had to be taken into account at the time of the tax reform.
Everyone would avoid the U.S. corporate tax benefit if the corporate tax rates were lowered.
The gains relative to another are a bit pletely.
In an economy that is growing, economists felt that it was less important.
Most of the burden of the tax was on them because they had to lower their price almost as much as the tax.
The luxury tax on boats was repealed three years after it was instituted.
The person who bears the burden can be different from the person who pays, because the allocation of tax burden by relative elasticity means that it doesn't matter who actually pays the tax.
If the tax of $10,000 had been paid by the consumer, your answer would have been different.
The demand curve is affected by the amount of tax paid.
Physically paying the tax is what you can see.
After adjusting for supply and demand price changes, the percentage of tax paid by the supplier and consumer is independent of who actually pays the tax.
Let's look at two policy questions in relation to what we know about tax incidence.
36 percent of federal government revenue is accounted for by the Social Security tax.
Half of Social Security taxes are placed on the employee and the other half on the employer.
The law places the tax on both, but it doesn't mean that the burden of the tax is shared between employees and employers.
Labor supply is less elastic than labor demand.
The Social Security tax burden is mostly on the employees, even though they only see their portion of the tax on their pay stub.
Let's say that you are advising a person running for Congress who has come up with the idea to place the entire tax on the employer and eliminate the tax on the employee.
It will have no effect according to our tax incidence analysis.
Employers will have to pay more in wages to compensate for the tax.
This example shows that the assessment of the tax can be different for different people.
The burden will be paid by those with the most inelastic supply who are less able to pay the tax by substitution.
It won't make a difference who pays the tax, but it may be a popular proposal because people look at statutory assessment.
Workers will no longer see a Social Security tax on their pay stub if the candidate is elected.
Politics doesn't often focus on surface appearance; economics tries to get under the surface, and always what makes sense economically.
Sales taxes paid by retailers on the basis of their sales revenue is the second policy question.
Consumers don't have the ability to change their buying habits because sales taxes are broadly defined.
Consumers bear the greater burden of the tax when demand is inelastic.
Most stores add the tax onto the bill after the initial sale is calculated to make you aware of the tax.
It doesn't matter if the tax is assessed on the store or on you, it matters a lot.
Let's first consider the two types of price controls mentioned in Chapter 5: price ceilings and price floors.
It is an implicit tax on producers and consumers when both supply and demand areelastic.
Taxes and price floors create deadweight loss.
A price ceiling is similar to a tax on producers and a subsidy to consumers.
Because of the price ceiling, it's not possible.
That isn't a coin cidence.
It's like the government puts a tax on suppliers and gives tax revenue to consumers when they sell the good.
The price floors have the opposite effect on the distribution of consumer and producer surplus.
Transfer consumer surplus to producers.
Taxes do not cause shortages.
As long as people pay taxes, they can choose how much they want to supply and consume.
Taxes create a wedge between the price the consumers pay and the price the suppliers receive.
The price consumers pay is the same as the price the suppli ers receive if the price ceiling is below equilibrium price.
It is necessary to find a method of rationing that limits the demand or increases the supply in the case of price ceilings and price floors.
We assumed that suppliers could choose how much or how little they wanted to supply.
Black markets are where individuals buy or sell illegally.
The government placed price controls on most consumer goods.
The result was empty store shelves and shortages of all types.
If consumers have the political power, there will be strong pressures to create price ceilings.
If the suppliers have political power, there will be strong pressures to create price floors.
People spend time and resources trying to transfer surplus from one group of people to another.
Lobbying for Rent can help figure out ways to kidnap executives in developing and tran sitional economies.
The possibility of kidnapping causes executives to hire bodyguards, which in turn causes kidnappers to think of ingenious ways to kidnap.
enormous amounts of resources are spent on activities that benefit no one when one group tries to extract surplus from another group.
Lobbying government has the same reasoning.
Lobbying government to increase their own surplus is an incentive for individuals to spend resources.
Others have an incentive to spend money.
Rent seeking through government is significant, and that much of the transfer of surplus that occurs through government intervention creates an enormous waste of resources.
They argue that the taxes and benefits of government programs do not help society much, but they cost resources.
The economists say that the majority of the government's redistribution is from one group of the middle class to another.
The incentives that consumers and producers have to lobby government to intervene in the market are what we need to understand the rent-seeking process a bit better.
We will begin with suppliers.
Political pressures to limit supply can be found in agricultural markets.
All the goods are supplied at the ceiling price.
An example is the military draft.
W forces are paid according to the government's choice.
The graph shows the effects of a draft.
The quantity of soldiers demanded exceeds the quantity supplied.
It would take an increase in the implicit tax to bring about equilibrium.
The draft imposes an implicit tax on draftees that depends on the elasticity of supply and demand.
If both don't show up on the books.
If both are elastic, the pay will be given to those who consume defense, but only slightly.
The draft suspect transfer from suppliers to consumers of national supply and demand is inelastic, in which case the defense.
The shaded triangle to the right of the market equilibrium would cost a lot more than the welfare loss triangle.
It requires large increases in taxes.
They argue that draft is cheaper and requires less taxes than a represents the opportunities suppliers lose.
The minimum reasoning is shown in the welfare loss triangle.
It's true that with a draft the government loses money.
The analysis assumes that the people drafted will be the ones who raised the wage to a market-clearing wage.
The cost of being drafted is the lowest.
It's not costless because the draft places a case.
Individuals are selected by paying a lower-than draft.
Individuals drafted are taxed by the Presley.
How much larger was Elvis when he was drafted?
They would be better off if there was an increase induce more.
As productivity increases, they do increase the quantity sold, but they also result in lower prices.
They get less for each unit they sell if you demand Q0 Q1 Quantity more.
The demand for agricultural goods is inelastic because food is a necessity.
Since demand is inelastic, the price declines by a greater proportion than the rise in quantity sold, meaning that total revenue declines and the farmers are worse off.
Farmers have an incentive to get the government to create a price floor so they can raise their revenue.
They did that during the Great Depression.
Farmers were instrumental in getting the government to establish the Farm Board, a federal agency whose job was to manage productivity of agricultural goods.
When demand iselastic, the benefits of limiting competition are greatest for suppliers.
Farmers have succeeded in getting the government to restrict the supply of agricultural goods.
The nature of benefits and costs has been suggested as a reason for farm groups' success.
The groups that are hurt by agricultural subsidies are large, but the negative effect on each individual in that group is relatively small.
This example shows us how markets work and how politics of government intervention work.
Suppliers have an incentive to pressure the government to limit the quantity supplied or to get together and look for other ways to do so.
Suppliers have to gain by limiting supply if demand is inelastic.
Sometimes sellers can get the government to limit quantity.
Sometimes sellers can limit supply by force.
A Professional Licensing placed threat is often effec tive.
Such threats are common in some developing economies.
There are opportunities for individuals to prevent others from entering the market.
There is a problem of political economy.
The central problem of political competition is to ensure that existing suppliers don't prevent others from entering the market, but government can also be used to prevent competition and protect to ensure that competition works.
Government is part of the solution.
Firms are not the only ones that can lobby the government.
Consider con sumers.
Consumers can face price increases if demand increases.
Consumers will scream for price controls when the supply of a good is inelastic.
In Chapter 5, if supply is inelastic, ings are imposed on apartments.
There was an increase in demand for apartments in New York City during World War II.