TRANSFERS AND TAX INCIDENCE THEORY

This paper responds to the points raised by Professor Ruggeri. First, it is shown that even if the alleged computational error did in fact o ccur (which is unclear), its quantitative significance is trivial. Sec ond, I argue that the more important issue is determining the appropri ate methodological approach to tax incidence analysis when transfers a re an important source of income. I point out the problem and inconsis tencies raised by the conventional approach to sales tax incidence, an d argue that Ruggeri's analysis does not help us resolve this issue.