The "Lazy Tax": How Companies Profit from Your Forgetfulness

A Stanford economist forgot to cancel his Peacock subscription. He paid for it for months before he noticed. Instead of just feeling annoyed, he did what economists do: he studied it.

Neale Mahoney and his colleagues at Stanford and Texas A&M analysed millions of credit card records to find out how much revenue companies earn purely because people forget to cancel. Their paper, published in the American Economic Review in 2025, found that consumer inattention roughly doubles seller revenue on average across the ten subscription services they studied. For some services, the boost was over 200%.

The mechanism was simple. When a credit card expires or gets replaced, subscribers have to actively re-enter their payment details. At that moment, roughly 8% cancel, compared to the usual 2% in any given month. The difference represents people who were paying for something they didn't want but hadn't got around to stopping.

The researchers called it inattention. The internet has a blunter term for it: the lazy tax.

What the lazy tax actually is

The lazy tax isn't a literal charge. It's the gap between what you'd pay if you actively reviewed every subscription each month and what you actually pay by doing nothing. It's the gym membership you haven't used since March. The streaming service you signed up for to watch one show. The free trial that quietly rolled into a $15/month charge.

Every company running a subscription model knows this gap exists. Many have built their entire business around it.

Finder's 2023 research found that 13 million Australians were paying what it called the "lazy tax" across various services, from insurance and utilities to subscriptions they'd stopped using. ING Australia's research found that unused subscriptions and forgotten outgoings could cost each Australian up to $1,261 per year. Across the country, that adds up to over $8 billion.

So I graduated HSC in 2016. My parents let me use their credit card to purchase a subscription to an educational resources site. I cancelled my subscription when I finished the HSC. Or so I thought? They have been charged for the past 3 years. At $82.40 per month for 3 years, I now owe my parents approximately $3,000.

This isn't a story about irresponsible people. It's a story about systems designed to be easy to forget.

The business model of forgetting

Some industries don't just benefit from forgetfulness. They depend on it.

Gyms are the textbook example. Industry data shows that up to 67% of gym memberships go completely unused, and 50% of new members quit within the first six months. Only about 18% of members use their gym consistently. The entire pricing model relies on this: if every member actually showed up, most gyms would be overcrowded and unprofitable. Low monthly fees only work because most people are subsidising the gym by paying without attending.

Australian gym chains compound this with 30-day notice periods, in-person cancellation requirements, and franchise-level policies that vary by location. The friction isn't accidental. Every barrier between you and cancellation is another month of revenue.

Streaming free trials are designed with the same logic. The value proposition is "try it free for 7 days." The business proposition is "a significant percentage of people will forget to cancel on day 7." Netflix, Stan, Disney+, and others have all used free trials (or deeply discounted introductory periods) knowing full well that conversion from trial to paid subscriber is partly driven by inattention, not satisfaction.

News paywalls have made this an art form. News Corp, the SMH, and The Australian offer $1/week or $4/month introductory rates that jump to $7-8/week after the promotional period. The signup is instant. Cancelling a News Corp subscription requires a phone call to a retention agent. That asymmetry is the entire strategy.

Software subscriptions use annual commitments disguised as monthly payments. Adobe's Creative Cloud defaults to "Annual, Paid Monthly" during signup. If you cancel before the year is up, you're hit with an early termination fee of 50% of your remaining payments. On a plan costing $113.49/month AUD, that can mean hundreds of dollars. The FTC sued Adobe over this exact practice in 2024.

Why you don't notice

The lazy tax works because of how human brains handle recurring, small charges.

Autopay makes charges invisible. When a subscription is set up as a direct debit or card charge, it bypasses the moment of decision. You never actively choose to pay. The money just leaves. This is by design. Companies push hard for autopay during signup because they know it dramatically reduces cancellation rates.

Small amounts don't trigger alarm bells. A $7.99 charge doesn't register the way a $96 annual charge would, even though they're the same thing. Companies price subscriptions monthly for exactly this reason. The psychological difference between "$8 a month" and "$96 a year" is significant, even though the maths is identical.

Subscription creep happens slowly. You don't wake up one morning with 15 subscriptions. You add one every few months. Each one seems small and reasonable at the time. The total only becomes alarming when you sit down and add it all up.

I always assumed "it's just a few bucks here and there," but once I added them up I was shocked. Music, streaming apps, productivity tools, random SaaS trials I forgot about. That's almost $150 every month disappearing quietly. Over a year, that's close to $1,800.

Deloitte's 2025 Media & Entertainment Consumer Insights report found that average monthly digital entertainment spending in Australia rose 24% in a single year, from $63 to $78 per household. Households now hold an average of 3.7 entertainment subscriptions, the highest on record. Gen Z households average $101 per month. And yet, Australians of all ages are spending less time on screens. They're paying more and using it less.

The companies that profit most

Not all subscriptions benefit equally from the lazy tax. The Stanford study found that the revenue boost varied substantially across services. The pattern is predictable: the companies that benefit most are the ones that combine low monthly costs with high friction to cancel.

A $7.99/month streaming service you barely watch is easy to ignore. A gym membership with a 30-day notice period and in-person cancellation requirement is easy to put off. A software subscription with an early termination fee is easy to get trapped in.

The common thread is that these companies have structured their products so that the cost of staying subscribed (a small monthly charge) always feels less painful than the cost of leaving (time, effort, phone calls, fees). Rational or not, most people choose the path of least resistance. And the path of least resistance is to keep paying.

What's changing (slowly)

Regulators are starting to pay attention. The ACCC has made subscription traps an enforcement priority for 2025-26 and 2026-27. The Australian Government announced draft legislation in February 2026 to ban unfair trading practices, including requirements that cancellation be as easy as signup. If passed, penalties could reach $50 million per breach.

In the US, the Stanford study's findings were cited in the FTC's push for "click to cancel" rules (though a federal court struck down the initial rule in July 2025). The FTC has separately taken action against Amazon ($2.5 billion settlement) and Adobe over their subscription practices.

But legislation takes time. The proposed Australian rules wouldn't take effect until mid-2027 at the earliest. Until then, the lazy tax keeps working.

How to stop paying it

The lazy tax is a design problem, not a character flaw. You're not "lazy" for not reviewing every charge every month. You're human. These systems are built to exploit exactly that.

But you can make it harder for them.

Do a 10-minute audit. Open your bank app. Scroll through the last three months. Highlight every recurring charge. Total it. Most people find at least two or three subscriptions they'd forgotten about or stopped using.

Cancel first, think later. If you haven't used a service in 30 days, cancel it now. You can always resubscribe. Almost every service keeps your data and preferences. The only thing you lose is the monthly charge.

Set renewal reminders. For annual subscriptions, put a calendar reminder two days before the renewal date. This turns an invisible charge into an active decision.

Use a dedicated card. Put all subscriptions on one credit card or virtual card number. When you want to do a clean sweep, you can see every recurring charge in one place. Some banks let you freeze or replace a card, which forces every subscription to ask you to re-enter your details (the same mechanism the Stanford study identified).

Watch the introductory rates. When a subscription offers $1/week for the first month, set a reminder for when the promotional period ends. That's when the price jumps and the lazy tax kicks in.

The companies profiting from your forgetfulness aren't breaking any laws (yet). But they've built a system where doing nothing costs you money. The only defence is to make doing something easier than they'd like.