Tax Incidence

This chapter reviews the concepts, methods, and results of studies that analyze the incidence of taxes. The purpose of such studies is to determine how the burden of a particular tax is allocated among consumers through higher product prices, workers through a lower wage rate, or other factors of production through lower rates of return to those factors. The methods might involve simple partial equilibrium models, analytical general equilibrium models, or computable general equilibrium models. We review partial equilibrium models, where the burden of a tax is shown to depend on the elasticity of supply relative to the elasticity of demand. In particular, we consider partial equilibrium models with imperfect competition. Turning to a general equilibrium setting, we review the classic model of Harberger (1962) and illustrate its generality by applying it to a number of different contexts. We also use this model to demonstrate the practicality of analytical general equilibrium modeling through the use of log linearization techniques. We then turn to dynamic models to show how a tax on capital affects capital accumulation, future wage rates, and overall burdens. Such models might also provide analytical results or computational results. We also focus on relatively recent models that calculate the lifetime incidence of taxes, with both intratemporal and intertemporal redistribution. Finally, the chapter reviews the use of incidence methods and results in the policy process.

The Distribution of Tax Burdens: An Introduction

This paper summarizes important developments in tax incidence analysis over the past forty years. We mark the date of the beginning of modern tax incidence analysis with the publication of Harberger (1962) and discuss the relation of subsequent work to this seminal paper.

A Tax on Output of the Polluting Industry is Not a Tax on Pollution: The Importance of Hitting the Target

We explore the effects of environmental taxes that imprecisely target pollution. A review of actual policies indicates few (if any) examples of a true tax on pollution. More typically, environmental taxes target an input or output that is correlated with pollution. We construct a simple analytical general equilibrium model to calculate the optimum tax rate on the input of the polluting industry, in terms of key behavioral parameters, and we compare this imprecisely-targeted tax to an ideal tax on pollution. Finally, we consider incremental tax reforms such as a change in either tax from some pre-existing level. Using a utility-based money-metric measure of welfare, we examine the losses that arise from not taxing pollution directly. With no existing tax, under our plausible parameters, the welfare gain from an output tax is less that half the gain from an emissions tax.

Stimulated Whole Blood Cytokine Release as a Biomarker of Immunosuppression in the Critically Ill

Objective: Reduced ex vivo lipopolysaccharide (LPS) stimulated whole blood pro-inflammatory cytokine release is a hallmark of immunosuppression in the critically ill and predicts adverse clinical outcomes. No standard technique for performing the assay currently exists. The impact of methodological heterogeneity was determined. Design, Setting, Subjects, and Interventions: Clinical experimental study set in a research laboratory. Venous blood from 5 to 10 healthy volunteers/experiment (total participant group: 18 subjects, 72% men, mean age 32) was stimulated ex vivo to evaluate the effect of variables identified via literature review on tumor necrosis factor-α (TNFα) release. These included sample handling, stimulation technique, and incubation conditions. Reporting convention was additionally assessed. Main Results: Measured TNFα release was significantly altered by source of LPS, concentration of LPS employed, duration and temperature of incubation prior to supernatant aspiration, and predilution of blood (repeated measures ANOVA, all P < 0.01). Sample handling prior to stimulation (anticoagulant employed, time to LPS addition, and storage temperature) also caused significant alterations in TNFα release. Considerable interindividual variation was observed (range 1,024–4,649 pg/mL, mean 2,339 pg/mL). Normalization by monocyte count and pretreatment with a cyclooxygenase inhibitor (indomethacin 10 μM) reduced the coefficient of variation from 47.17% to 32.09%. Conclusions: Inconsistency in interlaboratory methodology and reporting impairs interpretation, comparability, and reproducibility of the ex vivo LPS-stimulated whole blood cytokine release assay. A standardized validated technique is required. The advent of trials of immunoadjuvant agents renders this a clinical imperative

Frustration Driven Stripe Domain Formation in Co/Pt Multilayer Films

We report microscopic mechanisms for an unusual magnetization reversal behavior in Co/Pt multilayers where some of the first-order reversal curves protrude outside of the major loop. Transmission x-ray microscopy reveals a fragmented stripe domain topography when the magnetic field is reversed prior to saturation, in contrast to an interconnected pattern when reversing from a saturated state. The different domain nucleation and propagation behaviors are due to unannihilated domains from the prior field sweep. These residual domains contribute to random dipole fields that impede the subsequent domain growth and prevent domains from growing as closely together as for the interconnected pattern.Comment: 13 pages, 3 figures, to appear in AP