Sales Tax Not Included: Designing Commodity Taxes for Inattentive Consumers
122 Yale L.J. 258 (2012).
A spate of new research suggests that the salience of a tax dramatically shapes taxpayer behavior: the more salient a tax—i.e., the more prominent a good’s after-tax price—the more taxpayers respond. Policymakers make decisions about tax salience, whether they intend to or not, every time they impose a new tax, yet the normative implications of those decisions remain poorly understood. This Note derives new guidelines for how policymakers can manipulate tax salience to promote efficiency. In particular, I show how levying a combination of high- and low-salience taxes can raise consumer welfare and further other social goals.