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Tax salience edition:

  The Hated Property Tax:  Salience, Tax Rates, and Tax Revolts by Marika Cabral, Caroline Hoxby  –  #18514 (ED PE POL)

Because of the manner in which it is normally paid, the property tax 
is almost certainly the most salient major tax in the U.S. The 
property tax is also the least popular tax and the only major tax 
whose revenues have declined as a share of income.  We hypothesize 
that high salience explains the unpopularity of the property tax, the 
level of the property tax, and prevalence of property tax revolts. 
To identify variation in the salience of the property tax over local
jurisdictions and over time, we exploit conditionally random 
variation in tax escrow.  Tax escrow is a method of paying the 
property tax that makes it much less salient-as we demonstrate using 
survey evidence.  We find that areas in which the property tax is 
less salient are areas in which property taxes are higher and 
property tax revolts are less likely to occur.  We present several 
specification tests, including spatial correlation tests and 
instruments based on bank branches, that suggest that our results are 
valid.  An implication of our results is that voters facing a 
non-benevolent government may wish to keep taxes' salience high even 
if, as a result, they hate their highly salient taxes.

If behavioralists truly cared about humans achieving more of what they really want, I'd fully expect serious proposals to make taxes and spending policy more transparent. But no such proposals are forthcoming in their polite suggestions to nudge us in "libertarian paternalistic" style. Behavioralism is not about behavior. Well, I think their research funding may not last too long in that world – seems like no mistakes being made there. 

3 Responses to “The Behavioralist Crickets, A Continuing Series”

  1. Harry says:

    Interesting but not surprising research. To continue the thought, it would be good to measure attitudes of renters versus owners.

    At least in our area we have a relatively small school district where there is some control in electing school board directors; I am glad we do not have a county government-run school system.

  2. Harry says:

    Salient is one of those words I used to teach teenagers for vocabulary, to help with another correct answer on the SAT verbal section for maybe an extra five points. Had to look it up myself this time, and did not have to haul out the twelve-pound dictionary.

    Connecting to WC’s NBER link, I found a study on how Washington County, PA real estate prices may have been depressed by adjacent Marcellus Shale drilling, out of fear that water wells might be contaminated by nearby drilling. My first thought was that I wish I had the same problem, my neighbor striking it rich. But it is true that there is a saline problem drilling in ancient seas five thousand feet below.

  3. Harry says:

    I would settle for the behaviorists responding to the Hayek quotation in your masthead. Instead, the best they offer is, “I do not want to go there,” intellectual cowardice, the silence of the cricket which makes noise only when no one is in the room. A great metaphor, WC.

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