The Incidence of the Tax Structure

Property Tax.

The estimated incidence of the property tax, shown in line (13), is again regressive, though less so at the upper end of the scale than that of excise and sales taxes. The general principle, in estimating the incidence of this tax is that the part assessed on owner-occupied residences rests on the owner, the part assessed on the improvement cornponent in business property (including rental housing) rests on the consumer, and the part assessed on the rent component of business property rests on the owner. Farm real estate is treated as business property and a more detailed statement of our procedure is given in the appendix.

Social Insurance Contributions.

The estimated incidence of social insurance contributions, shown in lines (6) and (14) is progressive up to the $4,000 income range and becomes regressive thereafter. In arriving at this result, it was assumed that the employee contribution and one-half of the employer contribution fall upon the employee; and that one-half of the employer contribution is passed on to the consumer.

Conclusions It goes without saying that the above estimates of tax incidence must be used with reservation. They do not constitute the results of laboratory experiments which unfortunately are not at the economist's disposal. Nor do they involve as exhaustive a statistical analysis as might be undertaken. All sorts of theoretical and methodological qualifications apply which were discussed in connection with the 1948 study and which need not be repeated here.

In spite of these reservations some such information is needed for intelligent policymaking, and the picture here presented should give a fair approximation to the distribution of taxpayments. The primary conclusion, as I read it, remains that the overall tax structure in the United States is but moderately progressive over the crucial range of middle incomes, extending from, say, $2,000 to $10,000 and including nearly three-quarters of all spending units. Whether this is good or bad from the point of view of equity is not for the economist to say, but it is a factor to be kept in mind in future tax legislation. Secondly, let me draw your attention to the sharp distinction in the incidence of the Federal and the State-local tax package, and what this implies for future trends in our fiscal structure. Finally, there is the distinction in the incidence pattern of particular taxes, and the somewhat surprising role of the corporation tax.