The Effect of Tax Changes on Consumer Spending

6 Pages Posted: 26 Apr 2005

Date Written: December 2001

Abstract

Many supporters of the tax cut enacted this summer viewed it as an important stimulus to consumer spending. But an analysis of the effects of earlier income tax cuts suggests that the consumer response to such initiatives is, in fact, quite variable. Two conclusions stand out: First, consumers will be more likely to boost spending if the change in tax liabilities is permanent. Second, consumers will wait to increase spending until a tax change affects their take-home pay.

Keywords: taxes, consumer spending

JEL Classification: E21, E62, E65

Suggested Citation

Steindel, Charles, The Effect of Tax Changes on Consumer Spending (December 2001). Available at SSRN: https://ssrn.com/abstract=711385 or http://dx.doi.org/10.2139/ssrn.711385

Charles Steindel (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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