Some Analysis and Evidence of the Macro Effect of Direct and Indirect Taxes on Prices

The classical literature on tax shifting Is largely concerned with the microeconomic aspects of the problem and the welfare implication of particular forms of supplying the general revenue. Those propositions that are generally accepted on the basis of consistency with validated economic theory, specific empirical tests, or both» furnish a basis for predicting the effect of particular sources or tax revenue on the relative prices of particular commodities. Among the more familiar propositions is the conclusion that direct and indirect taxes will have substantially different effects on the prices of particular commodities.