Consumer Inattention and Tax Incidence.

• Author: Van Doren, Peter
• Position: Working Papers: A SUMMARY OF RECENT PAPERS THAT MAY BE OF INTEREST TO REGULATION'S READERS - Hidden Baggage: Behavioral Responses to Changes in Airline Ticket Tax Disclosure - Book review

Consumer Inattention and Tax Incidence

"Hidden Baggage: Behavioral Responses to Changes in Airline Ticket Tax Disclosure," by Sebastien Bradley and Naomi E. Feldman. August 2018. SSRN #3234195.

In previous columns, I described regulations intended to improve outcomes for consumers or job applicants that had unintended perverse results. Payday lending restrictions prevented soldiers from smoothing their consumption with no measurable reduction in excessive debt (Spring 2017). "Ban the box" laws prohibiting employers from asking about criminal history on initial job applications reduced black male employment (Fall 2016). And bans on the use of credit checks by employers in hiring decisions reduced job creation relative to trend by 12% (Summer 2018).

But sometimes regulations enacted to assist consumers can have unexpected benefits. This paper describes one such case. A 2012 U.S. Department of Transportation rule required quoted airline ticket prices to be tax inclusive in an effort to make pricing more transparent. Under...