Consumer Response to Tax Rebates

Matthew Shapiro and Joel Slemrod

No 8672, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Many households received income tax rebates in 2001 of $300 or $600. These rebates represented advance payments of the tax cut from the new 10 percent tax bracket. Based on a survey of a representative sample of households, this paper finds that only 22 percent of households receiving the rebate would spent it. Instead, they would either save it or use it to pay off debt. This very low rate of spending represents a striking break with past behavior, which would have suggested a much higher rate of spending. The low spending rate implies that the tax rebate provided a very limited stimulus to aggregate demand.

JEL-codes: E21 E65 (search for similar items in EconPapers)
Date: 2001-12
New Economics Papers: this item is included in nep-pub
Note: EFG PE
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Citations: View citations in EconPapers (27)

Published as Shapiro, Matthew D. and Joel Slemrod. "Consumer Response To Tax Rebates," American Economic Review, 2003, v93(1,Mar), 381-396.

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