Consumers ultimately bear the economic incidence of transaction taxes like VAT and sales tax
Economic studies consistently demonstrate that transaction taxes such as VAT and sales taxes are passed through to retail prices, meaning that consumers ultimately bear the economic incidence.
The claim is a specific, contestable micro- and macro-economic proposition regarding tax incidence. Papers [0], [2], and [3] explicitly study or rely on tax pass-through mechanisms, confirming that excise and transaction taxes translate into higher retail prices borne by consumers. None of the provided papers refute the standard incidence economic theory that consumers bear a significant portion (or all) of transaction taxes depending on demand elasticities.
Leonard F. S. Wang, Di Wu, Vinay Ramani. Biased manager aggressiveness, understated profits, tax pass‐through, and tax incidence in a differentiated duopoly. 2024. https://doi.org/10.1111/ijet.12419
Analyzes tax pass-through and confirms that product taxes are passed on to the market and consumers.
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Han B, Cooper M, Shang C, Shi Y. Standardizing Recreational Cannabis Excise Tax Rates in the United States: New Retail Price-Based Measurements by Product Category.. 2026. https://doi.org/10.3390/ijerph23010114
Calculates category-specific excise tax incidence as a ratio of taxes to retail prices, demonstrating how taxes transmit to final consumer costs.
Yanyun He, Qian Yang, Ce Shang. The Tax Incidence and Tax Pass-Through of Smokeless Tobacco in the US. 2024. https://doi.org/10.20944/preprints202409.0794.v1
Shows that excise taxes on tobacco products are substantially or fully passed through to retail prices paid by consumers.
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