In making decisions, individuals rely on heuristics or cognitive biases. One of these is salience, which refers to visibility or prominence. Individuals are likely to focus on information or items that are prominent or salient and ignore those that are less visible. This Article develops an argument for exploiting this cognitive bias in designing or modifying taxes. Most commentary assumes that the intentional use of low-salience taxes by the government is undesirable and that increased salience is always required; to do otherwise is to take advantage of the cognitive bias that causes individuals to ignore taxes that are not prominent or salient. Although increasing salience is often desirable, there is a political-economy argument for intentionally exploiting this bias by incorporating low-salience provisions into tax design. By clarifying the concepts of transparency, complexity, and salience, this Article establishes a vocabulary that should facilitate more productive exchanges among behavioral economists, cognitive psychologists, and tax scholars regarding the salience of various revenue provisions. Moreover, and more importantly, this Article offers the first comprehensive case for the normative desirability of low-salience taxes. While others have suggested that low-salience taxes may enhance economic efficiency, scholars thus far have expressed skepticism about the desirability of low-salience taxation from a democratic-theory perspective. This Article shows why low-salience taxation may in fact be democracy-enhancing. The Article concludes with a case study where the use of low-salience tax provisions is justified and effective, that is, where Congress finds it necessary to minimize the prominence of the tax because politically it cannot increase marginal tax rates.
Deborah H. Schenk,
Exploiting the Salience Bias in Designing Taxes,
Yale J. on Reg.
Available at: https://digitalcommons.law.yale.edu/yjreg/vol28/iss2/2