The Influence of Real Income Changes on the Incidence of a Partial Factor Tax

J. Gregory Ballentine and Ibrahim Eris
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J. Gregory Ballentine: Wayne State University
Ibrahim Eris: Instituto de Pesquisas Economicas São Paulo, Brazil

Public Finance Review, 1978, vol. 6, issue 4, 439-453

Abstract: Imposition of a partial factor tax (the most common example of which is a corporation income tax) will impose an excess burden on society. That excess burden implies a reduction in consumers' real income above and beyond the tax transfer to the government. The incidence of the tax depends, in part, on the way consumers react to that real income loss. In this paper we show that omission of this effect, as occurs in the well-known Harberger model, will bias results toward the conclusion that capitalists bear the tax burden when the corporate sector is labor intensive.

Date: 1978
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:6:y:1978:i:4:p:439-453

DOI: 10.1177/109114217800600404

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