Raising the stakes : experimental evidence on the endogeneity of taxpayer mistakes Naomi Feldman, Jacob Goldin and Tatiana Homonoff
By: Feldman, Naomi E
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Contributor(s): Goldin, Jacob | Homonoff, Tatiana A.
Material type: 
ArticlePublisher: 2019Subject(s): CONSUMO | IMPUESTOS | PRESION FISCAL | CONSUMIDORES | CONDUCTA
In:
National Tax Journal v. 71, n. 2, June 2018, p. 201-230 Summary: Recent evidence suggests consumers fail to account for taxes that are excluded from a good's displayed price. What is less understood is whether and how such "salience effects" depend on the magnitude of the tax. We conduct a laboratory shopping experiment with real stakes to study the effect of tax size on salience. We find no evidence that salience effects decline as the tax rate increases; we document a statistically significant salience effect at a tax rate that is considerably larger than the tax rates at which such effects have been previously documented. In fact, our results are more consistent with the hypothesis that higher taxes make consumers less attentive (at least for the range of taxes we consider). This result can be explained by a confirmation bias theory of salience: consumers tend to disregard information (like a tax) that does not align with their intention to purchase an item, and this lack of alignment increases in the size of the tax.
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| OP 233/2018/1-3 Do "catch-up-limits" raise retirement saving ? | OP 233/2018/1-4 A new method for applying VAT to financial services | OP 233/2018/2 National Tax Journal | OP 233/2018/2-1 Raising the stakes | OP 233/2018/2-2 The effect of flat tax rates on taxable income | OP 233/2018/2-3 Perceptions and realities of average tax rates in the federal income tax | OP 233/2018/2-4 Assessing the tax benefits of hybrid arrangements |
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Resumen.
Bibliografía.
Recent evidence suggests consumers fail to account for taxes that are excluded from a good's displayed price. What is less understood is whether and how such "salience effects" depend on the magnitude of the tax. We conduct a laboratory shopping experiment with real stakes to study the effect of tax size on salience. We find no evidence that salience effects decline as the tax rate increases; we document a statistically significant salience effect at a tax rate that is considerably larger than the tax rates at which such effects have been previously documented. In fact, our results are more consistent with the hypothesis that higher taxes make consumers less attentive (at least for the range of taxes we consider). This result can be explained by a confirmation bias theory of salience: consumers tend to disregard information (like a tax) that does not align with their intention to purchase an item, and this lack of alignment increases in the size of the tax.
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