No abstract

We examine the impact of a January 2012 enforcement action by the U.S. Department of Transportation that required domestic airlines to incorporate all mandatory ticket taxes in advertised fares. We show that the more prominent display of taxinclusive prices is associated with significant reductions in consumer tax incidence and demand along more heavily-taxed itineraries. Ticket revenues are commensurately reduced. These results suggest a pronounced degree of inattention to taxes not included in advertised fares and reinforce prior findings from the literature on tax salience in a quasi-experimental context characterized by economically-significant taxes and endogenous prices.

Michigan's implementation of assessment limits gives rise to a wide variation in taxable basis across comparable homes. Exploiting the fact that the resulting differences in property tax liability are temporarily inherited by new homebuyers, I estimate the degree of capitalization of these largely idiosyncratic tax differences to evaluate whether homebuyers understand the tax implications of their home purchases. Consistent with anecdotal evidence but in stark contrast to the traditional view of rational consumer behavior, I find that homebuyers are woefully inattentive to the temporary nature of their initial tax obligations, resulting in an overpayment of nearly $10,000 for the average home.

Despite an extensive literature on the normative implications of different international tax regimes and an empirical literature addressing individual specific predictions, there exists little evidence encompassing the broad range of effects of taxing corporations' foreign-source income on a worldwide or territorial basis. This paper takes a more comprehensive quantitative approach by examining stock market reactions surrounding three events over the course of which Japan's 2009 adoption of a dividend exemption system was developed into proposed law. Using an event study methodology which leverages individual firm characteristics and accounts for contemporaneous financial market developments, we find that Japanese firms with less foreign exposure and fewer opportunities for tax avoidance experienced relatively larger abnormal returns, while differences in firms' foreign and domestic effective tax rates accounted for an aggregate capitalization effect of ¥4.1 trillion. We attribute these gains to a combination of enhanced opportunities for international expansion among smaller domestic firms, direct tax savings on official estimates of existing undistributed foreign earnings, and general cultural biases against tax planning in an environment of largely unchanged anti-abuse provisions.

No abstract