TY  - JOUR
AU  - House,Christopher L.
AU  - Shapiro,Matthew D.
TI  - Phased-In Tax Cuts and Economic Activity
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10415
PY  - 2004
Y2  - April 2004
UR  - http://www.nber.org/papers/w10415
L1  - http://www.nber.org/papers/w10415.pdf
N1  - Author contact info:
Christopher House
University of Michigan
Department of Economics
238 Lorch Hall
Ann Arbor, MI  48109-1220
Tel: 734/764-2364
Fax: 734/764-2769
E-Mail: chouse@umich.edu

Matthew D. Shapiro
Department of Economics
University of Michigan
611 Tappan St
Ann Arbor, MI 48109-1220
Tel: 734/764-5419
Fax: 734 764-2769
E-Mail: shapiro@umich.edu
AB  - Phased-in tax reductions are a common feature of tax legislation. This paper uses a dynamic general equilibrium model to quantify the effects of delaying tax cuts. According to the analysis of the model, the phased-in tax cuts of the 2001 tax law substantially reduced employment, output, and investment during the phase-in period. In contrast, the immediate tax cuts of the 2003 tax law provided significant incentives for immediate production and investment. The paper argues that the rules and accounting procedures used by Congress for formulating tax policy have a significant impact in shaping the details of tax policy and led to the phase-ins, sunsets, and temporary tax changes in both the 2001 and 2003 tax laws.
ER  -