Tax Incidence: General Remarks Incidence depends on disposition of tax revenue Balanced budget incidence computes the combined effects of levying taxes and government spending financed by those taxes Differential tax incidence compares the incidence of one tax to another, ignoring how the money is spent Often the comparison tax is a lump sum tax -a tax that does not depend on a person's behavior7 Tax Incidence: General Remarks • Incidence depends on disposition of tax revenue – Balanced budget incidence computes the combined effects of levying taxes and government spending financed by those taxes. – Differential tax incidence compares the incidence of one tax to another, ignoring how the money is spent. • Often the comparison tax is a lump sum tax – a tax that does not depend on a person’s behavior