Recent evidence suggests consumers pay less attention to commodity
taxes levied at the register than to taxes included in a good's posted
price. If this attention gap is larger for high-income consumers than
for low-income consumers, policymakers can manipulate a tax's
regressivity by altering the fraction of the tax imposed at the register.
We investigate income differences in attentiveness to cigarette taxes,
exploiting state and time variation in cigarette excise and sales
tax rates. Whereas all consumers respond to taxes that appear in
cigarettes' posted price, our results suggest that only low-income
consumers respond to taxes levied at the register. (JEL D12, H22,
H25, H71, L66)
Goldin, Jacob, and Tatiana Homonoff.
"Smoke Gets in Your Eyes: Cigarette Tax Salience and Regressivity."
American Economic Journal: Economic Policy,
Consumer Economics: Empirical Analysis
Taxation and Subsidies: Incidence
Business Taxes and Subsidies including sales and value-added (VAT)
State and Local Taxation, Subsidies, and Revenue
Food; Beverages; Cosmetics; Tobacco; Wine and Spirits