Consumer Response to Tax Rebates

55 Pages Posted: 20 Dec 2001 Last revised: 25 Oct 2010

See all articles by Matthew D. Shapiro

Matthew D. Shapiro

University of Michigan at Ann Arbor - Department of Economics; National Bureau of Economic Research (NBER)

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business; National Bureau of Economic Research (NBER)

Date Written: December 2001

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.

Suggested Citation

Shapiro, Matthew D. and Slemrod, Joel B., Consumer Response to Tax Rebates (December 2001). NBER Working Paper No. w8672. Available at SSRN: https://ssrn.com/abstract=294721

Matthew D. Shapiro (Contact Author)

University of Michigan at Ann Arbor - Department of Economics ( email )

and Survey Research Center
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National Bureau of Economic Research (NBER) ( email )

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313-764-2769 (Fax)

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
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Ann Arbor, MI 48109-1234
United States
734-936-3914 (Phone)
734-763-4032 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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