Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/273665 
Year of Publication: 
2022
Series/Report no.: 
Working Papers No. 2022-09
Publisher: 
Banco de México, Ciudad de México
Abstract: 
This paper studies commodity taxation in a model featuring heterogeneous consumers, imperfect competition, and tax salience. We derive new formulas for the incidence and marginal excess burden of commodity taxation highlighting interactions between tax salience and market structure. We estimate the necessary inputs to the formulas by using Nielsen Retail Scanner and Consumer Panel data covering grocery stores and households in the U.S. and detailed sales tax data. We estimate a large amount of pass-through of taxes onto consumer prices and find that households respond more to changes in prices than taxes. We also estimate significant heterogeneity in tax salience across households. We calibrate our new formulas using these results and conclude that essentially all of the incidence of sales taxes falls on consumers, and the marginal excess burden of taxation is larger than estimates based on standard formulas that ignore imperfect competition and tax salience.
Subjects: 
Sales taxes
Marginal Excess Burden
Incidence
Salience
Imperfect Competition
JEL: 
D12
D22
D43
D60
L13
H25
H71
Document Type: 
Working Paper
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