Behavioral Economics and Tax Policy
Behavioral economics is changing our understanding of how economic policy operates, including tax policy. In this paper, we consider some implications of behavioral economics for tax policy, such as how it changes our understanding of the welfare consequences of taxation, the relative desirability of using the tax system as a platform for policy implementation, and the role of taxes as an element of policy design. We do so by reviewing the logic of specific features of tax policy in light of recent findings in areas such as tax salience, program take-up, and fiscal stimulus.
We thank the Smith Richardson Foundation, Alfred P. Sloan Foundation, and Russell Sage Foundation for financial support. The views expressed in this article are those of the authors and should not be interpreted as those of the Congressional Budget Office or the National Bureau of Economic Research.