In contrast to statutory incidence, which refers to the individual who is legally obligated to pay the tax, actual economic tax incidence describes who is subject to the tax's burden.
Taxes are compulsory contributions that a government agency, whether local, regional, or federal, imposes on people or businesses. Public works and services like roads and schools, as well as programs like statutory incidence and Medicare, are funded by tax income.
In economics, taxes fall on whoever bears the cost of the tax, whether this is the taxed entity, such as a business, or the final users of the items produced by the business. Payroll taxes, federal and state income taxes, and sales taxes are just a few of the statutory incidence taxes that need to be taken into account from an accounting standpoint.
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