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The effect of tax changes on consumer spending

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  • Charles Steindel

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.

Suggested Citation

  • Charles Steindel, 2001. "The effect of tax changes on consumer spending," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 7(Dec).
    • Handle: RePEc:fip:fednci:y:2001:i:dec:n:v.7no.11
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    References listed on IDEAS

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    Cited by:

    1. James Alm & Asmaa El-Ganainy, 2013. "Value-added taxation and consumption," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(1), pages 105-128, February.
    2. Katz, Raúl & Jung, Juan, 2023. "The impact of taxation in the telecommunications industry," Information Economics and Policy, Elsevier, vol. 62(C).
    3. Brigitte Desroches & Marc-André Gosselin, 2002. "The Usefulness of Consumer Confidence Indexes in the United States," Staff Working Papers 02-22, Bank of Canada.
    4. Morgan Daly & Mary Jane Lenard & Lisa Monahan, 2022. "To Spend Or Not To Spend: An Investigation Of Consumer Behaviors Related To Tax Refunds," Accounting & Taxation, The Institute for Business and Finance Research, vol. 14(1), pages 1-14.
    5. Ifrim Mihaela, 2015. "Post-Crisis Fiscal Dilemmas In Romania," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 4, pages 185-189, August.

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