Taxpayer Search for Information: Implications for Rational Attention
Forthcoming - American Economic Journal: Economic Policy
97 Pages Posted: 3 Oct 2014
Date Written: July 23, 2014
We examine data on capital-gains-tax-related information search to determine when and how taxpayers acquire information. We find seasonal increases in information search around tax deadlines, suggesting that taxpayers seek information to comply with tax law. Positive correlations between stock market activity and search as well as year-end spikes in information search on capital losses when the market performs poorly suggest that taxpayers seek information for tax planning purposes. Policy changes and news events cause information search. These data suggest that taxpayers are not always fully informed, but that rational attention and exogenous shocks to tax salience drive taxpayer information search.
Keywords: Information search, rational attention, capital gains taxation, tax complexity
JEL Classification: D80, D83, H31, H24
Suggested Citation: Suggested Citation