Do you think most people pay more taxes then they need to because they are signaling?

No; I think they are trading off compliance costs vs. the risk of paying more taxes than they owe. But it's not clear that the price discrimination story is applicable here.

To the paper being convincing. Be specific.

Basically, the problem with Gabaix--Laibson is that its "myopic" consumers are persistently biased in addition to having bounded rationality. They persistently expect to be charged less e.g. for the hotel stay than they actually are. A boundedly rational consumer would expect to be overcharged for some addons, even if she dosn't know in advance what the marked-up addons will be or whether she can avoid the surplus charge (unlike Gabaix--Laibson's sophisticated consumers). This may or may not change her response to efforts at more "transparent" pricing.

That people who care "sophisticated" will prefer systems in which they can obtain an advantage.

Yes, this is fairly obvious. But this also implies that naïve folks will avoid these same systems. In general, it will pay for sophisticated folks to credibly refrain from using such systems, unless the system provides further benefits (say, effective price discrimination).

Does your car mechanic or IT guy tell you the exact truth or do they pad things just a little. Do teammates working on a project ever slack but make it look like they are doing work?

This is an asymmetrical information problem. People expect that a car mechanic will pad costs if she can get away with it; so they try to establish norms under which more info is provided, or else the practice is deterred directly.