Tax Incidence: Tax incidence is the way in which the burden of taxation is shared among individuals, businesses, and other entities subject to the tax. This is typically determined by the tax rate, but can also be affected by how the tax is administered and which goods or services are taxed. To understand who bears the brunt of a given tax, the incidence of taxes must be taken into account. Knowing where the tax falls is a crucial factor in considering the overall economic impact of any tax policy.