Smoke Gets in Your Eyes: Cigarette Tax Salience and Regressivity

Goldin, Jacob; Homonoff, Tatiana

doi:10.1257/pol.5.1.302

Cited by 121 publications

(94 citation statements)

References 19 publications

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“…In both experimental and observational data, Chetty, Looney, and Kroft (2009) find that consumers adjust their buying decisions in the face of higher taxes only when taxes are clearly highlighted; for instance, posting "after-tax" price next to items in a grocery store dramatically decreased demand despite evidence that consumers knew and could calculate after-tax prices. Similar effects have been documented in other settings (Cabral and Hoxby 2012;Finkelstein 2009;Goldin and Homonoff 2013). The results reported in this paper highlight a different context where decision-makers react to government activity in the way that theory might predict, but only when the activity is highly salient.…”

Section: Salience Of Government Activity As An Explanation For Crosupporting

confidence: 81%

Education's Gambling Problem: Earmarked Lottery Revenues and Charitable Donations to Education

Jones¹

2015

Economic Inquiry

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I examine the impact that lotteries introduced to support education have on voluntary contributions to education. State lotteries, and the causes they are introduced to support, are highly publicized. This provides the opportunity to assess whether donors are crowded‐out by government spending of which they are almost certainly aware. Using donor‐level survey data and nonprofits' tax returns, I find that donations to education‐related organizations fall with the introduction of a lottery. This result is driven by donors' response to the new (highly publicized) government revenue source (rather than a decrease in nonprofit fundraising efforts). (JEL D64, H3, H75)

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Section: Salience Of Government Activity As An Explanation For Crosupporting

confidence: 81%

Education's Gambling Problem: Earmarked Lottery Revenues and Charitable Donations to Education

Jones¹

2015

Economic Inquiry

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“…In the marketplace, the fact that money is top-ofmind can have potentially beneficial consequences for financially constrained consumers. Research finds that poor consumers are often less susceptible than wealthier consumers to hidden taxes (Goldin & Homonoff, 2013) and other pricing tricks, such as "quantity surcharges," in which the per-unit cost for an item increases when a higher quantity is purchased (Binkley & Bejnarowicz, 2003).…”

Section: Stress and Anxiety Feeling Lack Of Controlmentioning

confidence: 99%

How Financial Constraints Influence Consumer Behavior: An Integrative Framework

Mittal²,

et al. 2018

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Financial constraints are economic limitations on behavior. Given that millions of people experience chronic or episodic financial constraints, we sought to review research that provides insight into how they affect consumer behavior. We propose an integrative framework that draws insights from multiple literatures that have examined financial constraints from different perspectives. The framework distinguishes between four perspectives, which are rooted in literatures on resource scarcity, choice restriction, social comparison, and environmental uncertainty and highlights different temporal stages of responding to financial constraints, distinguishing between reacting, coping, and adapting. Beyond the obvious negative effects of financial constraints, our framework emphasizes consumer resilience, highlighting that consumers often successfully cope with and devise adaptive strategies to deal with financial constraints. By broadening the behavioral and temporal scope of financial constraints considered within consumer psychology, this framework helps us to understand the often strong and sometimes counterintuitive effects of financial constraints on consumer behavior.

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“…Colantuoni and Rojas (2013) claim the lack of sales tax salience explains why the introduction of a 5.5 percent sales tax on soft drinks in Maine in 1991 had no discernible impact on the sales volume of soft drinks. Goldin and Homonoff (2013) exploit state and time variation in cigarette sales, excise taxes (included in the posted price) and sales taxes (added on at the register) to show that both high-and low-income consumers respond to changes in excise taxes, but only low-income consumers respond to changes in sales taxes on cigarettes, suggesting the progressivity of a revenue-neutral shift from posted to register taxes.…”

Section: Literaturementioning

confidence: 99%

The Impact of Including, Adding, and Subtracting a Tax on Demand

Feldman

Ruffle

2015

American Economic Journal: Economic Policy

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We test the equivalence of tax-inclusive, tax-exclusive and tax-rebate prices through a series of experiments differing only in their handling of the tax. Subjects receive a cash budget and decide how much to keep and how much to spend on various attractively priced goods. Subjects spend significantly more under tax-exclusive prices whereas total purchases under tax-inclusive and tax-rebate prices are similar. These results persist throughout most of the ten rounds despite feedback and the ability to revise purchases. The asymmetric response to tax liabilities and rebates highlights consumers' ability both to internalize and to willfully ignore hidden price components. (JEL D12, H25, H31)A n emerging empirical literature on price partitioning highlights firms' ability to increase consumer demand by not displaying the final price (see, e.g., Hossain and Morgan 2006; Chetty, Looney, and Kroft 2009). In particular, these studies demonstrate that when price components are shrouded or hidden such that the posted price is less than the all-inclusive price higher demand ensues. The lack of salience of the shrouded price components is the explanation typically put forth. Are consumers really so woefully unaware of the amount to be added at the checkout or might they consciously choose to ignore it? Moreover, how does consumer demand respond to price components that are deducted at the register such that the final price is below the initial price?In this paper, we introduce a series of carefully designed laboratory experimental treatments that, for the first time, address these questions. Specifically, we test the equivalence of tax-inclusive, tax-exclusive, and tax-deduction prices in a laboratory setting that admits controlled variation. A number of attractive goods highly discounted in price are presented to each subject who decides how much of his cash endowment to keep and how much to spend on purchases of each good. The subject repeats participants from numerous departmental seminars and conferences, and two anonymous referees for valuable comments. Ziv Ben-Naim provided excellent research assistance. We are grateful to Ben-Gurion University for funding the experiments. The analysis and conclusions set forth are those of the authors and do not indicate concurrence by the Board of Governors of the Federal Reserve Board or members of the research staff.

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Smoke Gets in Your Eyes: Cigarette Tax Salience and Regressivity

Cited by 121 publications

References 19 publications

Education's Gambling Problem: Earmarked Lottery Revenues and Charitable Donations to Education

Education's Gambling Problem: Earmarked Lottery Revenues and Charitable Donations to Education

How Financial Constraints Influence Consumer Behavior: An Integrative Framework

The Impact of Including, Adding, and Subtracting a Tax on Demand

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