It does not address the incidence of the state corporation income tax or that portion of the property tax that is levied on nonresidential property, although these may be borne in part by California residents. In restricting ourselves to state taxes, we also do not analyze federal taxes paid by California residents. Economic incidence may differ from the statutory incidence of the tax, which is defined as the entity that pays the tax. Economic incidence attempts to measure the true burden of taxation. State income taxes are borne by households.
Consumers bear the burden of sales and use taxes.
Sales taxes paid by business are ultimately passed on to consumers in the form of higher prices. Homeowners bear the burden of property taxes. The first two assumptions are standard in the literature, while the third is similar to assumptions made by the Congressional Budget Office in their work on tax incidence. In order to assess the burden of taxes on California residents an appropriate measure of income is needed, since tax burdens are typically expressed as the ratio of taxes paid to total income. We used a comprehensive measure of annual, money income in our work.