Smoke gets in your eyes: Cigarette tax salience and regressivity

Jacob Goldin, Tatiana Homonoff

Research output: Contribution to journalArticle

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.

Original languageEnglish (US)
Pages (from-to)302-336
Number of pages35
JournalAmerican Economic Journal: Economic Policy
Volume5
Issue number1
DOIs
StatePublished - Feb 2013

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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