Final answer:
The burden of direct taxes is shouldered by the individual or entity upon which it is imposed. The impact of these taxes can vary depending on whether the tax is progressive or regressive. Tax incidence, which determines who ultimately pays the tax, is influenced by the elasticity of demand and supply. The correct option is b. person
Step-by-step explanation:
The burden of direct taxes is borne by the person on whom it is levied. For example, progressive taxation scales impose higher rates on higher income brackets, effectively making the wealthier pay more.
However, regressive taxes such as social security taxes in the United States can hit lower income earners harder as a proportion of their total income, because these taxes cap at a certain income level and do not affect income earned above this threshold.
Understanding this concept of tax incidence is essential as it reveals who bears the cost of the tax. If the demand is more inelastic than supply, consumers will generally bear most of the tax burden.
This implies that no matter the price increases due to taxation, consumers will still purchase the product or service. Conversely, if the supply is more inelastic than the demand, sellers are more likely to absorb the greater portion of the tax burden.
Historically, during the period leading up to the American Revolution, a distinction was made between different types of taxes and who should levy them.
The colonists were particularly opposed to taxation without representation, asserting that only elected bodies where they were actually represented had the right to tax them. The correct option is b. person