Thursday, February 5, 2009
Amy Finkelstein (MIT, Department of Economics) presents EZ-Tax: Tax Salience and Tax Rates at NYU today as part of its Colloquium Series on Tax Policy and Public Finance. The co-convenors are Daniel Shaviro (NYU) & Alan Auerbach (UC-Berkeley, Department of Economics). Here is the abstract:
This paper examines whether the salience of a tax system affects equilibrium tax rates. I analyze how tolls change after toll facilities adopt electronic toll collection (ETC); drivers are substantially less aware of tolls paid electronically. I estimate that, in steady state, tolls are 20 to 40 percent higher than they would have been without ETC. Consistent with a salience-based explanation for this toll increase, I find that under ETC, driving becomes less elastic with respect to the toll and toll setting becomes less sensitive to the electoral calendar. Alternative explanations appear unlikely to be able to explain the findings.