The Household Spending Response to the 2003 Tax Cut: Evidence from Survey Data

31 Pages Posted: 5 Oct 2005

See all articles by Joseph Lupton

Joseph Lupton

University of Michigan at Ann Arbor - Department of Economics; Board of Governors of the Federal Reserve - Division of Research and Statistics

Louise Sheiner

Board of Governors of the Federal Reserve System; National Bureau of Economic Research (NBER)

Julia Lynn Coronado

Federal Reserve Board - Division of Research and Statistics

Date Written: August 2005

Abstract

The Jobs and Growth Tax Relief and Reconciliation Act of 2003 has been described as textbook fiscal stimulus. Using household survey data on the self-reported qualitative response to the tax cuts, we estimate that the boost to aggregate personal consumption expenditures from the child credit rebate and the reduction in withholdings raised the average level of real GDP in the second half of 2003 by 0.2 percent and by 0.3 percent in the first half of 2004. We also show that households in the survey were well aware of their tax cuts and tended to spend equally out of the child credit rebate and the reduced withholdings, a result that is contrary to the conventional wisdom.

Keywords: JGTRRA, tax policy, consumer spending

JEL Classification: E21, E62, H31

Suggested Citation

Lupton, Joseph P. and Sheiner, Louise and Coronado, Julia Lynn, The Household Spending Response to the 2003 Tax Cut: Evidence from Survey Data (August 2005). FEDS Working Paper No. 2005-32, Available at SSRN: https://ssrn.com/abstract=813264 or http://dx.doi.org/10.2139/ssrn.813264

Joseph P. Lupton (Contact Author)

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

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

Board of Governors of the Federal Reserve - Division of Research and Statistics

20th and C Streets, NW
Washington, DC 20551
United States

Louise Sheiner

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Julia Lynn Coronado

Federal Reserve Board - Division of Research and Statistics ( email )

Washington, DC 20551
United States
202-452-3044 (Phone)
202-872-4927 (Fax)

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