Let’s play “Who’s Paying That Tax?”

In my last blog I talked about the limitations that we all have on decision making and how we satisfice and make decisions based on incomplete information.  That is all true, but it does not mean that we should not strive to have a more robust understanding of the landscape we are working in.  To that end, I am going to be devoting some of my blogs to topics that are both interesting and important to understand for those working in government, especially those in budget and finance positions.  This week: tax incidence! Hopefully I have not lost you already.  Tax incidence is just the fancy way of saying “who pays the tax” or “who bears the burden of the tax.”  As you may have already guessed who pays and who bears the burden may not be the same person (or party).  These are actually the two types of tax incidence: statutory incidence and economic incidence. Statutory incidence is determined by who actually remits the tax to the government or who pays the tax. Economic incidence is who bears the burden of the tax or in econ-speak whose resources (money mostly) are affected by the tax. So let’s use a