legal incidence

Tax incidence refers to how the economic burden of a tax is distributed among affected parties. It's crucial for understanding the true cost of a tax beyond who initially pays it to the government.1

There's a distinction between:
* Legal (or statutory) incidence: Who is legally obligated to remit the tax to the government.12
* Final (or economic) incidence: Who ultimately bears the burden of the tax in terms of lost welfare.12

The difference between these two is known as tax shifting. For instance, a sales tax legally falls on the seller, but they often pass it on to consumers through higher prices, making consumers bear the final incidence. The ability to shift a tax depends on market power and factors like competition and labor supply. Economists use supply and demand analysis to study tax incidence.12