Smoke Gets in Your Eyes: Cigarette Tax Salience and Regressivity
AbstractRecent 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)
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Journal: Economic Policy.
Volume (Year): 5 (2013)
Issue (Month): 1 (February)
Find related papers by JEL classification:
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
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