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Smoke Gets in Your Eyes: Cigarette Tax Salience and Regressivity

Author

Listed:
  • Jacob Goldin

    (Princeton University)

  • Tatiana Homonoff

    (Princeton University)

Abstract

Recent evidence suggests consumers pay less attention to commodity taxes that are levied at the register than to taxes that are 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, only low-income consumers respond to taxes levied at the register.

Suggested Citation

  • Jacob Goldin & Tatiana Homonoff, 2011. "Smoke Gets in Your Eyes: Cigarette Tax Salience and Regressivity," Working Papers 561a, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:561a
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    cigarette taxes; tax burden; smokers; consumer habits;
    All these keywords.

    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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