Title

Smoke Gets in Your Eyes: Cigarette Tax Salience and Regressivity

Author(s)

Jacob Goldin Jacob Goldin (Princeton University)

Tatiana Homonoff 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.

Creation Date

2011-08

Section URL ID

IRS

Paper Number

561a

URL

https://dataspace.princeton.edu/bitstream/88435/dsp01wm117n99n/1/Goldin%20&%20Homonoff%20-%20IRS%20Working%20Paper%20August%202011.pdf

File Function

Jel

D12, H22, H25, H71, L66

Keyword(s)

cigarette taxes, tax burden, smokers, consumer habits

Suppress

false

Series

1