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In economics, the tax incidence measures who actually pays for a tax. Economists distinguish between the entities who ultimately bear the burden of a tax and those who the tax is originally collected from. The tax burden measures the true economic effect of the tax, measured by the difference between real incomes before and after imposing the tax, and taking into account how the tax causes prices to change. For example, if a 10% tax is imposed on sellers of butter, but the market price rises 8% as a result, then 80% of the tax incidence falls on buyers, not sellers.
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