Tax Incidence Anomalies
2025-06-04
This article reviews the literature on the incidence of commodity and labor taxes and focuses on empirical results that show stark departures from the canonical model of tax incidence, which I refer to as anomalies. In particular, there is mounting evidence questioning three fundamental implications of the canonical model: ( a ) that statutory incidence is irrelevant for economic incidence, ( b ) that the relative magnitude of the demand and supply elasticities is a sufficient statistic for tax incidence, and ( c ) that tax incidence is symmetric for increases and decreases. I review this empirical evidence and draw implications for the canonical model's relevance.