WHEN TAXPAYERS IGNORE LESS VISIBLE TAXES

Shoppers are inattentive to taxes, say the authors of a National Bureau of Economic Research Working Paper. To prove this, the authors partnered with a supermarket chain to conduct an experiment in one of its stores:

For taxable items, like cosmetics and other non-food products, stores customarily do not include the sales tax in the price tags on the shelves, but rather have them rung up at the register, making them less salient to the consumer.
In the targeted store, the researchers adjusted the price tags to display prices including the 7.375 percent sales tax.

The result was a decline in sales of those items by 6 to 8 percent; reminding shoppers of the tax at the time of purchase made for more cautious consumers, suggesting that most of them do not normally take into account the sales tax on such products.

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