Friday, March 23, 2012

Amazon's Anticipated Sales Tax Collection Offers a Test of the Rational Expectations Hypothesis

The Wall Street Journal reports that Amazon will start collecting sales tax on California orders starting in September 2012.   The California sales tax rate is 7.25%.  If Amazon shoppers in California know about the Amazon tax regime shift and know the sales tax rate, rational expectations theory would predict that shoppers will "Pre-Order" all of the books and other things they plan to buy from Amazon.   A statistician who studies the August 2012 data should observe a huge spike in Amazon sales then (pre-sales tax) and then see an equal drop in Amazon sales in October 2012 (post-sales tax).