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The Behavioral Impacts of Poverty Tax Relief: Salience or Framing?

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New York State’s School Tax Relief Program, STAR, provides state-funded exemptions from school property taxes. From 2006-07 to 2008-09, these exemptions were supplemented with rebates, which arrived as a check in the mail. The purpose of this paper is to determine whether these two algebraically equivalent but administratively distinct policies of tax relief led to different behavioral responses. Drawing on behavioral economics, we explore the impact of STAR on the price elasticity of demand for school quality based on the concepts of salience and framing. Our main results are that the behavioral impact of the STAR provisions are larger (1) when they are most salient and (2) when they are framed as a property tax reduction instead of as unlabeled income. We also show that salience and framing can help to explain flypaper effects linked to state educational aid and to the resources that are freed up by a decline in the price of education.

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  • John Yinger & Phuong Nguyen-Hoang, 2015. "The Behavioral Impacts of Poverty Tax Relief: Salience or Framing?," Center for Policy Research Working Papers 186, Center for Policy Research, Maxwell School, Syracuse University.
    • Handle: RePEc:max:cprwps:186
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    More about this item

    Keywords

    Property Tax Relief; Demand for Education; Salience; Framing; Flypaper Effect;
    All these keywords.

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare

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