Do Tax Cuts Boost the Economy?
AbstractThere are many economists who argue that temporary tax cuts, like those in the 2009 stimulus and the ones proposed by President Obama last week, have no impact on the economy. They argue that people will save a temporary tax credit rather than spend it. Stanford Economics Professor John Taylor, who served as Under Secretary of the Treasury for International Affairs under President Bush, is one of the economists making this argument. He purports to show that there was no statistically significant increase in private consumption of goods and services as a result of certain types of government transfers made over the last decade. According to his analysis, it is unclear whether an additional dollar of government transfers led to any additional spending, or, alternatively, whether it raised personal savings by more than one dollar. This paper shows that there is very little indication that – based on Taylor’s work – personal transfers from the government fail to stimulate private spending.
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Bibliographic InfoPaper provided by Center for Economic and Policy Research (CEPR) in its series CEPR Reports and Issue Briefs with number 2011-18.
Length: 9 pages
Date of creation: Sep 2011
Date of revision:
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stimulus; recession; tax cuts;
Find related papers by JEL classification:
- E - Macroeconomics and Monetary Economics
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
- E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
- H - Public Economics
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-09-22 (All new papers)
- NEP-MAC-2011-09-22 (Macroeconomics)
- NEP-PBE-2011-09-22 (Public Economics)
- NEP-PKE-2011-09-22 (Post Keynesian Economics)
- NEP-PUB-2011-09-22 (Public Finance)
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