American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Smoke Gets in Your Eyes: Cigarette Tax Salience and Regressivity
American Economic Journal: Economic Policy
vol. 5,
no. 1, February 2013
(pp. 302–36)
Abstract
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)Citation
Goldin, Jacob, and Tatiana Homonoff. 2013. "Smoke Gets in Your Eyes: Cigarette Tax Salience and Regressivity." American Economic Journal: Economic Policy, 5 (1): 302–36. DOI: 10.1257/pol.5.1.302Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- H22 Taxation and Subsidies: Incidence
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H71 State and Local Taxation, Subsidies, and Revenue
- L66 Food; Beverages; Cosmetics; Tobacco; Wine and Spirits
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