Statutory vs economic burden
Prices and wages adjust, so the less elastic side bears more, regardless of who remits the tax (Kotlikoff & Summers, 1987; Fullerton & Metcalf, 2002).
The corporate tax debate
Harberger (1962) showed capital mobility spreads the burden to all capital; open-economy work points to workers. Suárez Serrato and Zidar (2016) split it among workers, landowners and owners, linking to tax competition.
Evidence and limits
Gruber (1997) found Chilean payroll taxes shifted to wages; Saez et al. (2012) found statutory incidence mattered in Greece; Chetty et al. (2009) showed salience matters.
FAQ
- What is it in simple terms?
- It asks who really ends up paying a tax once prices and wages adjust.
- Who bears more?
- The side less able to change its behaviour, the less elastic one.
Sources reviewed: 2026-10-26
References
- Harberger, A. C. (1962). The incidence of the corporation income tax. Journal of Political Economy, 70(3), 215–240. The founding general-equilibrium analysis showing corporate tax burdens spread to all capital.
- Kotlikoff, L. J., & Summers, L. H. (1987). Tax incidence. In A. J. Auerbach & M. Feldstein (Eds.), Handbook of public economics (Vol. 2, pp. 1043–1092). North-Holland. A handbook chapter surveying static and dynamic incidence theory.
- Fullerton, D., & Metcalf, G. E. (2002). Tax incidence. In A. J. Auerbach & M. Feldstein (Eds.), Handbook of public economics (Vol. 4, pp. 1787–1872). Elsevier. An updated review linking elasticities to incidence, with modern methods.
- Gruber, J. (1997). The incidence of payroll taxation: Evidence from Chile. Journal of Labor Economics, 15(S3), S72–S101. Chilean evidence that payroll taxes were shifted fully onto wages.
- Saez, E., Matsaganis, M., & Tsakloglou, P. (2012). Earnings determination and taxes: Evidence from a cohort-based payroll tax reform in Greece. Quarterly Journal of Economics, 127(1), 493–533. Greek evidence that statutory incidence can matter, contrary to textbook neutrality.
- Suárez Serrato, J. C., & Zidar, O. (2016). Who benefits from state corporate tax cuts? A local labor markets approach with heterogeneous firms. American Economic Review, 106(9), 2582–2624. Estimates how corporate tax burdens split among workers, landowners and owners.
- Chetty, R., Looney, A., & Kroft, K. (2009). Salience and taxation: Theory and evidence. American Economic Review, 99(4), 1145–1177. Shows tax visibility changes behaviour and incidence, a behavioural extension.