The Incidence of a Tax Is Not Determined by Who

question 47

Essay

The incidence of a tax is not determined by who pays the tax out of pocket.Explain why this is so.

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Definitions:

Treasury Stock

Shares that were issued and later reacquired by the issuing company, reducing the amount of outstanding stock on the open market.

Income Statement

A financial statement that shows a company's revenues and expenses, leading to the total profit or loss over a specific period.

Par Stock

The ideal stock level that a business aims to maintain to fulfill customer orders without overstocking.

Stock Split

A reduction in the par or stated value of a common stock and the issuance of a proportionate number of additional shares.