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suppose you buy a share of stock at a price of $100 and a year later it is worth $125. suppose further that the rate of inflation for the year is 10%. if you are subject to a 15% capital gains tax, how much larger is your tax burden than it would be if you were required to pay taxes only on your real return?

Respuesta :

The total tax burden required to pay taxes only on your real return is $3.75.

What is tax burden?

In economics, the impact of a specific tax on the distribution of economic wellbeing is known as tax incidence or tax burden. Economists make a distinction between the entities that end up paying taxes and those that are first taxed. The difference between real earnings or utility costs before and after imposing the tax, accounting for how the tax affects prices, serves as a measure of the tax burden, which represents the tax's actual economic weight. The majority of the burden falls on consumers, not sellers, in the case of a 10% tax imposed on butter sellers but an 8% increase in market price as a result. The tax incidence should, in general, not go against the ideals of a just tax system, especially justice.

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