NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Consumer Response to Tax Rebates

Matthew D. Shapiro, Joel Slemrod

NBER Working Paper No. 8672
Issued in December 2001
NBER Program(s):   EFG   PE

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.

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Document Object Identifier (DOI): 10.3386/w8672

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

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