Also known as the average tax rate. Examples include California's excise taxes on alcoholic beverages and cigarettes. Can constitute either a specified dollar or percentage amount, and can apply to specified types of individuals, businesses, property, institutions, sources of income, or other classifications. An example is the exemption of income from taxation of nonprofit organizations, as long as receipts received are related to the nonprofit activities of the entity. Incidence Refers to who bears the burden of a tax.
Tax incidence can take two formseconomic and statutory incidence.
Economic incidence involves who ultimately bears the cost of the tax. This may differ from statutory incidence, which is simply who initially pays the tax. The process of determining the amount or share of a taxpayer's income that is allocable to a particular geographic jurisdictionsuch as Californiafor tax purposes. Indexing The annual upward adjustment under the income tax of marginal tax bracket boundaries, certain credits, and the standard deduction by the Consumer Price Index to compensate for inflation. The income tax rate that is applied to the highest or last dollar of a taxpayer's income.