Download or read book The Effect of Tax Changes on Consumer Spending written by Charles Steindel and published by . This book was released on 2005 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book Determining the Consumption Effects of Announced Permanent and Temporary Tax Cuts in Accordance with the Permanent Income Hypothesis written by Aileen Liu and published by . This book was released on 1984 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt: For several years, economists have been debating how well Federal tax policy changes have performed in readjusting the economy. Tax change policies have been instituted periodically since World War II up to the very present. The goals sought by the legislators have varied. The tax cut policy in the Kennedy administration was set up to invigorate a recessionary economy. Under the Reagan administration, tax cuts are a tool to increase savings and investment. Part of the reason for the inconsistency in policy aims is due to the lack of consensus on how a tax cut will perform in a given period . Most predictive models ignore the state of the economy at the time, the degree of consumer optimism, and lags in the adjustment of consumer expectations. These variables are vital in determining the consumers' reactions to a given tax cut during a given economic phase . Moreover, whether consumers can even distinguish the windfalls from a tax cut apart from increases in take home pay from a wage hike, is a matter of debate. Recent discussions have been focused on the temporal nature of the tax cuts. The significance of the issue seems real enough such that cuts are determined and categorized according to their permanent or transitory nature of consumer spending after a tax reduction that is permanent or one that is temporary (either a one-shot rebate or a cut specified to last for one or two years), can be measured to see whether each has a distinctive effect on consumer spending. The widely accepted Permanent Income Hypothesis (PIH) states that transitory changes have their main impact on saving and not on consumption. Permanent Income on which consumer spending is based, is a weighted average of consumers' past incomes, for consumption patterns take time to readjust to increments in today's income. Given this view, a temporary tax cut will barely have an effect on permanent income, since the change is known to be temporary. Consumption will then proceed in the same direction as if there had been no tax change at all . Macroeconomists argue that a rise in income stimulates consumer spending. A tax cut is easily associated with the growth of consumer spending, if one agrees with the premise that consumers have treated the increase in take-horne pay from the tax cut in the same way they treat increases in their take-home pay from other sources (Okun, 1971). Given the supposition that consumers plan their spending patterns over a horizon, the consumers would calculate a larger spending increase today, knowing that they will attain the same tax cut in each future period.
Download or read book Dining and Wining During the Pandemic A Quasi Experiment on Tax Cuts and Consumer Spending in Lithuania written by Mr. Serhan Cevik and published by International Monetary Fund. This book was released on 2023-09-08 with total page 15 pages. Available in PDF, EPUB and Kindle. Book excerpt: Could temporary tax cuts stimulate consumer spending? Sector-specific measures to the COVID-19 pandemic provides a quasi-experimental variation in consumption patterns to infer a causal effect of tax policy changes. Using a novel dataset of daily debit and credit card transactions, this paper investigates the effectiveness of Lithuania’s decision to cut the standard value-added tax (VAT) rate from 21 percent to 9 percent on restaurants and catering services during the pandemic in a difference-in-differences regression framework. I obtain robust evidence that the VAT reduction has had no statistically significant impact on consumer spending on restaurants and catering services, while other policy interventions such as mobility restrictions and vaccination have more pronounced effects. These results have important policy implications in terms of the expected stimulative effect of sector-specific VAT reductions and the effective design of fiscal policy interventions to counter the impact of pandemics during which mobility is highly constrained.
Download or read book Man Out written by Andrew L. Yarrow and published by Brookings Institution Press. This book was released on 2018-09-11 with total page 340 pages. Available in PDF, EPUB and Kindle. Book excerpt: The story of men who are hurting—and hurting America by their absence Man Out describes the millions of men on the sidelines of life in the United States. Many of them have been pushed out of the mainstream because of an economy and society where the odds are stacked against them; others have chosen to be on the outskirts of twenty-first-century America. These men are disconnected from work, personal relationships, family and children, and civic and community life. They may be angry at government, employers, women, and "the system" in general—and millions of them have done time in prison and have cast aside many social norms. Sadly, too many of these men are unsure what it means to be a man in contemporary society. Wives or partners reject them; children are estranged from them; and family, friends, and neighbors are embarrassed by them. Many have disappeared into a netherworld of drugs, alcohol, poor health, loneliness, misogyny, economic insecurity, online gaming, pornography, other off-the-grid corners of the internet, and a fantasy world of starting their own business or even writing the Great American novel. Most of the men described in this book are poorly educated, with low incomes and often with very few prospects for rewarding employment. They are also disproportionately found among millennials, those over 50, and African American men. Increasingly, however, these lost men are discovered even in tony suburbs and throughout the nation. It is a myth that men on the outer corners of society are only lower-middle-class white men dislocated by technology and globalization. Unlike those who primarily blame an unjust economy, government policies, or a culture sanctioning "laziness," Man Out explores the complex interplay between economics and culture. It rejects the politically charged dichotomy of seeing such men as either victims or culprits. These men are hurting, and in turn they are hurting families and hurting America. It is essential to address their problems. Man Out draws on a wide range of data and existing research as well as interviews with several hundred men, women, and a wide variety of economists and other social scientists, social service providers and physicians, and with employers, through a national online survey and in-depth fieldwork in several communities.
Download or read book Temporary Income Taxes and Consumer Spending written by Alan S. Blinder and published by . This book was released on 1978 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Both economic theory and casual empirical observation of the U.S. economy suggest that spending propensities from temporary tax changes are smaller than those from permanent ones, but neither provides much guidance about the magnitude of this difference. This paper offers new empirical estimates of this difference and finds it to he quite substantial. The analysis is based on an amendment of the standard distributed lag version of the permanent in-conic hypothesis that distinguishes temporary taxes from other income on the grounds that the former are "more transitory." This amendment, which is broadly consistent with rational expectations, leads to a nonlinear consumption function. Though the standard error is unavoidably large, the point estimate suggests that a temporary tax change is treated as a 50-50 blend of a normal income tax change and a pure windfall. Over a 1-year planning horizon, a temporary tax change is estimated to have only a little more than half the impact of a permanent tax change of equal magnitude, and a rebate is estimated to have only about 38 percent of the impact.
Download or read book The Impact on Consumers of a Restructured Personal Federal Tax written by John Huss Green and published by . This book was released on 1986 with total page 184 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Do Tax Cuts Starve the Beast written by Christina Romer and published by . This book was released on 2007 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: The hypothesis that decreases in taxes reduce future government spending is often cited as a reason for cutting taxes. However, because taxes change for many reasons, examinations of the relationship between overall measures of taxation and subsequent spending are plagued by problems of reverse causation and omitted variable bias. To deal with these problems, this paper examines the behavior of government expenditures following legislated tax changes that narrative sources suggest are largely uncorrelated with other factors affecting spending. The results provide no support for the hypothesis that tax cuts restrain government spending; indeed, they suggest that tax cuts may actually increase spending. The results also indicate that the main effect of tax cuts on the government budget is to induce subsequent legislated tax increases. Examination of four episodes of major tax cuts reinforces these conclusions.
Download or read book Expected Taxes and Household Consumption Behavior written by Lorenz Kueng and published by . This book was released on 2012 with total page 107 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this dissertation I ask two basic questions: First, how predictable are personal income tax changes in the U.S. and second, does household consumption respond to news about future tax changes, or does it mostly respond at the time when the tax rates actually change? These are interesting questions because they have broad implications for macroeconomics and public economics. The rational-expectations life-cycle theory of consumption is the workhorse in modern macroeconomics. While there are various specifications of this theory, two predictions are common across them. First, consumption should not respond to predictable income changes and second, consumption should respond to news about future after-tax lifetime income. There is a large literature that tests the first implication of the rational-expectations life-cycle theory and generally rejects the model by finding significant consumption responses to predictable income changes -- that is, it finds that consumption is in fact excessively sensitive to predictable income changes. Very few studies focus on the theory's second main prediction, that household consumption responds to news about after-tax income changes, even if current after-tax income has not changed yet. To the best of my knowledge this dissertation is indeed the first study to use micro-level data to estimate the consumption response to news. I use fiscal policy to study these two questions because it offers two main advantages over other empirical frameworks commonly used by macroeconomists to test the consumption theory and to analyze the effect of news on macroeconomic aggregates. First, exploiting the fact that there is a lag between the decision to change taxes and the implementation of the tax changes allows me to separate the behavioral response to news from the response to the actual policy changes. Therefore, the response to tax news is not confounded by the response to the actual tax change. Second, actual tax changes are directly observable without measurement issues, which is different from other news shocks that have been recently studied, in particular news about future total factor productivity. Therefore, my measure of news about future taxes can be directly compared with the actual evolution of the tax rates. Regarding public economics, this dissertation addresses another question that is of interest to public policy makers. During the current Great Recession, in which conventional monetary policy is not effective due to the zero lower bound on nominal interest rates, policy makers have shifted attention to fiscal interventions. In order to assess the effectiveness of fiscal policy we have to know the total effect of a tax reform on the economy, i.e. the tax multiplier. Unfortunately, almost all studies that provide estimates of tax multipliers focus on the response of the economy to actual tax changes. These estimates might miss a fraction of the total effect of a tax reform if tax changes are predictable and if the behavior of economic agents is forward-looking. Ignoring anticipation effects can therefore bias the tax multiplier downward. The identification of news about future tax rates is key for answering these questions. In this dissertation I exploit the fact that there exist two classes of fixed-income securities in the U.S. that are very similar except for the tax treatment of their income streams. Interest on municipal bonds is tax-exempt, while interest on Treasury bonds is subject to federal income taxes; thus, relative price changes between municipal and Treasury bonds reflect changes in expected future tax rates, holding fixed other risk factors. I go beyond identification of the timing of news to directly measure the entire path of expected tax rates. The fact that different bonds have different maturities quantifies the degree of tax foresight, since yield spreads of bonds with different maturities reflect information about future taxes over different horizons. Hence, the tax news shocks derived from the bond prices measure not only when households receive information, but also what information they receive. Identifying the entire path of expected tax rates in turn is important for testing the basic rational-expectations life-cycle model of consumption, as the theory predicts that consumption responds one-for-one to changes in expected after-tax lifetime income. The term structure of municipal yield spreads identifies the expected persistence of a tax shock, which is a crucial factor that determines the optimal consumption response according to the theory. For instance, if a tax change is expected to be only transitory, then the theory predicts that consumption does not respond much. On the other hand, if a tax reform is expected to have a large persistent component, then consumption should respond much stronger. Combining these market-based tax expectations with consumption data from the Consumer Expenditure Survey I find that consumption of high-income households increases by close to 1% in response to news of a 1% increase in expected after-tax lifetime income, consistent with the basic rational-expectations life-cycle theory. On the other hand, households who have lower income, less education, or are more credit constrained respond less to news. However, the same households also respond one-for-one with large news shocks, consistent with rational inattention.
Download or read book Tax Withholding and Estimated Tax written by and published by . This book was released on 1999 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Cambridge Handbook of Consumer Psychology written by Cait Lamberton and published by Cambridge University Press. This book was released on 2023-04-06 with total page 873 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the last two years, consumers have experienced massive changes in consumption – whether due to shifts in habits; the changing information landscape; challenges to their identity, or new economic experiences of scarcity or abundance. What can we expect from these experiences? How are the world's leading thinkers applying both foundational knowledge and novel insights as we seek to understand consumer psychology in a constantly changing landscape? And how can informed readers both contribute to and evaluate our knowledge? This handbook offers a critical overview of both fundamental topics in consumer psychology and those that are of prominence in the contemporary marketplace, beginning with an examination of individual psychology and broadening to topics related to wider cultural and marketplace systems. The Cambridge Handbook of Consumer Psychology, 2nd edition, will act as a valuable guide for teachers and graduate and undergraduate students in psychology, marketing, management, economics, sociology, and anthropology.
Download or read book 100 Years of U S Consumer Spending written by and published by . This book was released on 2006 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Taxes Budget Deficits Ad Consumer Spending written by Martin Feldstein and published by . This book was released on 1987 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Because of the restrictive assumptions required to establish the theory of Ricardian equivalence, its relevance in practice is essentially an empirical question. The strongest direct evidence in favor of Ricardian equivalence is Roger Kormendi's (1983) article in the American Economic Review. That paper appeared to provide strong empirical support for Ricardian equivalence by showing that increases in government spending on goods and services depress consumer spending while changes in tax receipts have no effect on consumer spending. The present study shows that Kormendi's results are a misleading implication of the experience during World War I1 when shortages, rationing and patriotic appeals to self-restraint caused an abnormally high rate of saving at the same time that the government deficit-financed a uniquely massive increase in defense spending. When those years are excluded from the sample, Kormendi's results are reversed. The estimates presented here show that in the equation specified by Kormendi, but with the years 1941 through 1946 excluded, increases in tax receipts have had a substantial negative effect on consumption while increases in government spending on goods and services have had essentially no effect on consumption. This evidence is exactly the opposite of the implications of Ricardian equivalence. This conclusion is robust with respect to a variety of modifications in the way that the basic equation is estimated: using an AR1 correction to deal with serial correlation; limiting the analysis to the Federal government's fiscal variables; respecifying the variables as ratios to net national product to reduce collinearity; estimating for the most recent 35 years instead of for the period since 1931; and using an instrumental variable procedure to reduce the problem of endogeneity. In each of these specifications, the results indicate that taxes depress consumer spending while government outlays on goods and services have either a smaller or a totally insignificant effect.
Download or read book Tax News written by Lorenz Kueng and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Although theoretical models of household behavior often emphasize fiscal foresight, empirical studies of household consumption have yet to document the role of news about tax changes. Using novel high-frequency bond data, I develop a model of the term structure of municipal yield spreads as a function of future top income tax rates and a risk premium. Testing the model using the presidential elections of 1992 and 2000 as two quasi-natural experiments shows that financial markets forecast future tax rates remarkably well in both the short and long run. Combining these market-based tax expectations with data from the Consumer Expenditure Survey, I find that spending of higher-income households increases by close to 1% in response to news of a 1% increase in expected after-tax lifetime (permanent) income. These findings imply that by ignoring anticipation effects, previous estimates of the total effect of a tax change could be substantially biased.
Download or read book Consumption Taxes written by Michael A. Schuyler and published by . This book was released on 1984 with total page 166 pages. Available in PDF, EPUB and Kindle. Book excerpt: Part of the Fiscal Series published by Institute for Research on the Economics of Taxation. A discussion on the effect of consumption taxes and their effect on income tax.
Download or read book Do Tax Cuts Starve the Beast written by Christina D. Romer and published by . This book was released on 2010 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: The hypothesis that decreases in taxes reduce future government spending is often cited as a reason for cutting taxes. However, because taxes change for many reasons, examinations of the relationship between overall measures of taxation and subsequent spending are plagued by problems of reverse causation and omitted variable bias. To deal with these problems, this paper examines the behavior of government expenditures following legislated tax changes that narrative sources suggest are largely uncorrelated with other factors affecting spending. The results provide no support for the hypothesis that tax cuts restrain government spending; indeed, they suggest that tax cuts may actually increase spending. The results also indicate that the main effect of tax cuts on the government budget is to induce subsequent legislated tax increases. Examination of four episodes of major tax cuts reinforces these conclusions.
Download or read book The Effects of Taxation on Capital Accumulation written by Martin Feldstein and published by Chicago : University of Chicago Press. This book was released on 1987 with total page 512 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research on capital formation has long been a major focus of studies sponsored by the National Bureau of Economic Research because of the crucial role of capital accumulation in the process of economic growth. The papers in this volume examine the influence of taxes on capital formation, with specific focus on the determinants of saving and the process of investment in plant and equipment.
Download or read book Estimates of Federal Tax Expenditures written by United States. Department of the Treasury and published by . This book was released on 1975 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt:
