Our analysis makes a clear prediction in this case. With elastic demand and
inelastic supply, the burden of a tax falls largely on the suppliers. That is, a tax
on yachts places a burden largely on the firms and workers who build yachts
because they end up getting a lower price for their product. The workers, however,
are not wealthy. Thus, the burden of a luxury tax falls more on the middle
class than on the rich.
inelastic supply, the burden of a tax falls largely on the suppliers. That is, a tax
on yachts places a burden largely on the firms and workers who build yachts
because they end up getting a lower price for their product. The workers, however,
are not wealthy. Thus, the burden of a luxury tax falls more on the middle
class than on the rich.
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