The statutory side does not control the economic burden

Market prices adjust to the same after-tax outcome.

A $4 tax collected from sellers shifts supply upward by $4: sellers require a buyer price $4 above the amount they keep. A $4 tax collected from buyers shifts demand downward by $4: at each quantity, buyers offer sellers $4 less than the total amount they pay. Either representation produces the same buyer-seller wedge and quantity in the basic model.

After a per-unit tax, the market has two relevant prices. Buyers pay P_b and sellers receive P_s, with P_b-P_s=t. Demand responds to the full buyer price. Supply responds to the net seller price. Treating one labeled price as if both sides face it erases the tax wedge and produces the wrong quantity.

The statutory side is the party responsible for forwarding payment to the government. The economic side is the party whose real terms worsen after prices adjust. If sellers remit the tax, they may raise the posted price. If buyers remit it, their willingness to offer sellers falls. Under the basic assumptions, both laws lead to the same equilibrium wedge.

If the buyer price rises by $3 and the seller’s received price falls by $1, buyers bear three-fourths of the burden and sellers one-fourth. The less elastic side bears more because it has fewer alternatives and changes quantity less readily. Perfectly inelastic demand leaves quantity unchanged and places the entire burden on buyers. Perfectly elastic demand prevents the buyer price from rising, placing the burden on sellers.

Measure each burden from the original equilibrium price. If the old price was $10, the post-tax buyer price is $13, and sellers keep $9, buyers lose $3 per unit and sellers lose $1. The full $4 wedge is not added again. Buyer and seller burdens per unit must sum to the tax.

Changing remittance does not change incidence

Demand is relatively inelastic and supply relatively elastic. Whether a $5 tax is mailed by stores or added to buyers’ tax returns, buyers have fewer alternatives and bear most of the economic burden through a higher total price. The administrative rule changes who sends the payment, not the underlying relative elasticities.

Incidence can differ across time because elasticity changes. Housing supply may be relatively fixed in the short run, placing more of a new property-related burden on owners. Over time, construction and conversion can respond. If a question states a horizon, use the elasticities relevant to that horizon rather than a timeless slogan.

Do not confuse tax incidence with fairness. Saying buyers bear 75 percent is a positive prediction about market adjustment. Whether that burden is equitable depends on income, ability to pay, benefits received, and normative criteria not contained in the supply-and-demand graph.

If prices are not shown, relative elasticities may still determine the qualitative split. If prices are shown, calculate the actual changes from the pre-tax price rather than relying on visual steepness. Axis scaling can make one curve look steeper without changing the numerical elasticity relationship stated in the problem.