Question

describe how tax incidence can differ from the party entity, (corporate luxury, etc) that is taxed give an example

Answer 1

Tax impact is on the person who is taxed but incidence is on the person who finally bears it. Tax incidence can vary depending on party entity that is taxed. If those are taxed who can't shift it or pass it to others, then they bear tax. But if those are taxed who can shift it or pass it to others then tax incidence is on those to whom it is shifted. E. G. Tax on salt is borne usually by buyers as supply is elastic and demand is inelastic. On the other hand excise tax and tax on luxury items like business class air travel, yachts etc(as was done by Congress in 1990) is borne by manufacturers as supply is less elastic and demand is elastic