The tax law and scholars who study it often operate under the assumption that taxpayers behave rationally. Yet, as legislators seem to know, often we do not. One cognitive failure that influences the scope and shape of taxes is our tendency to fixate on some facts while ignoring others. For example, employer withholding of taxes from an employee's salary should make the tax no less burdensome than if it were paid directly by the employee. Nevertheless, some taxpayers who didn’t seek excess withholding to force savings irrationally celebrate the receipt of a federal or state tax refund as if it were a windfall. Similarly, shoppers react differently to posted prices that include or don’t include sales tax, even though the total cost of the item is the same. The panel will consider the systemic implications of tax salience (and its absence) on both tax policy and the tax system’s regulatory functions.
Business Meeting at Program Conclusion.