Who Pays Taxes?

Tax Payment vs. Tax Burden

Tax payments are the amounts paid to the government, based on tax rates and tax rules. Tax burden reflects who a tax ultimately falls upon, after the cost of a tax payment is spread between higher prices, lower profits, and/or diminished activity. The distribution of the tax burden between various people is called the tax incidence.

A corporation may send the government a tax payment, but that money ultimately must come from either customers, employees, or shareholders. Because a corporation is only a legal ficton representing its group of owners, a corporation can never bear a tax burden. The targets of a particular tax scheme may make the tax payments, but almost never bear the tax burden.