Tax incidence is a matter that is highly dependent upon the economic conditions at any given time, primarily the price elasticity of producers and consumers of something that is taxed, that can vary considerably even without any change to the tax laws and who is legally responsible for making payments of the tax at any one time. See generally Wikipedia. As explained at this link:
Assessing tax incidence is a major economics subfield within the field
of public finance.
Most public finance economists acknowledge that nominal tax incidence
(i.e. who writes the check to pay a tax) is not necessarily identical
to actual economic burden of the tax, but disagree greatly among
themselves on the extent to which market forces disturb the nominal
tax incidence of various types of taxes in various circumstances.
The effects of certain kinds of taxes, for example, the property tax,
including their economic incidence, efficiency properties and
distributional implications, have been the subject of a long and
contentious debate among economists.
The empirical evidence tends to support different economic models
under different circumstances. For example, empirical evidence on
property tax incidents tends to support one economic model, known as
the "benefit tax" view in suburban areas, while tending to support
another economic model, known as the "capital tax" view in urban and
rural areas.
There is an inherent conflict in any model between considering many
factors, which complicates the model and makes it hard to apply, and
using a simple model, which may limit the circumstances in which its
predictions are empirically useful.
Tax incidence is also dependent upon one's economic model that the factors considered going into it. There is rarely full consensus on who really bears the full economic burden of any particular tax.
Tax laws and tax policies are normally not made by economists, however. Instead, they are made by elected officials and their political appointees, who rely on simpler rules of thumb that may or may not correspond to the economic reality.
For example, legislators most often assume that corporate income taxes are born by shareholders of the corporations taxed, that property taxes on rental real estate are born by tenants, and that gasoline taxes are born by end consumers of gasoline, even when there is economic literature suggesting otherwise. Legislators also tend to assume, on a partisan basis, that the economic burden of particular taxes is born by the person with the least political sympathy in their partisan coalition.
Whether or not tax laws are actually successful at forcing a particular class of people to bear the economic incidence of a particular tax doesn't have a consensus objective answer in most cases, because it is model dependent.
Also, actual tax incidence is, in any case, a question for Economics.SE rather than Politics.SE. But while whether these efforts actually work is an economics question, what policy makers attempt to do to influence economic tax incidence is a politics question.
The example of windfall profits taxes
But, probably the most notable example of tax laws that are deliberately devised to have an economic impact on a particular class of taxpayers are windfall profits taxes, which try to focus the incidence of taxation on firms that suddenly see a rise in profits for reasons that are largely beyond their control:
A windfall tax is a higher tax rate on profits that ensue from a
sudden windfall gain to a particular company or industry.
There have been windfall taxes in various countries across the world,
including Australia, Italy, and Mongolia (2006-2009). During the
2021–2023 global energy crisis, policy specialists at the
International Monetary Fund recommended that governments institute
permanent windfall profits taxes targeted at economic rents in the
energy sector, excluding renewable energy to prevent hindering its
further development.
Windfall profits taxes are basically an attempt to exploit a loophole in the economic theory known as Coase theorem, which holds that in the long run "if the provision of a good or service results in an externality and trade in that good or service is possible, then bargaining will lead to a Pareto efficient outcome regardless of the initial allocation of property."
A corollary of the Coase theorem is that in the long run, economic markets and not the formal allocation of tax burdens, will end up determining who bears the economic burden of taxation.
A windfall profits tax attempts to short circuit that logic by applying only to short term changes in profits that arise before the market has time to adapt to them (in light of the relative elasticities of supply and demand for the relevant firms and consumers) and shift the economic burden from the firms that pay the tax to people who do business with them.
The example of the U.S. income tax exemption for municipal bonds
Another notable example of legislators considering tax incidence in writing tax legislation is the income tax exemption for interest on municipal bonds in U.S. tax law. In this case, legislators count on the people benefiting the exemption not receiving its true economic benefits, rather than the other way around.
Originally, this tax exemption was based upon a belief that state and local governments had sovereign immunity from federal income taxation. *See McCulloch v. Maryland, 17 U.S. 159, 210 (1819). See also Pollock v. Farmers' Loan & Trust Company, 157 U.S. 429 (1895). This theory has since been discarded as a matter of constitutional law. See generally, this 1969 law review article. But, based upon arguments made by economists, the tax break, which nominally mostly benefits wealthy investors, has not been repealed.
In this case, the conventional wisdom among policy makers is that even though the income tax exemption for municipal bond interest directly benefits high tax bracket individuals who invest in municipal bonds, that the economic incidence of the long term stable tax exemption inures predominantly to municipal governments in the form of lower interest rates for municipal bonds relative to the interest rates paid on corporate bonds from private companies that are similarly creditworthy.
This conventional wisdom is supported by the observation that the interest rate on municipal bonds is typically close to the interest rate on the highest credit rated corporate bonds reduced by the maximum marginal individual income tax rate on ordinary income (i.e. about 40% lower).
Since giving state and local government investments in infrastructure funded by municipal bonds a mild subsidy is a policy that has strong bipartisan political support, this policy has remained in the Internal Revenue Code of the U.S., even though ordinarily Democrats campaign on favoring a policy of taxing the rich more heavily and not less heavily as this tax exemption does.
