A Skeptical Note on the Efficacy of Temporary Sales Tax Reductions

Abstract

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COUNTERCYCLICAL TAX CHANGES AND CONSUMERS’ EXPENDITURE*

“…In this section four resounding platitudes will be stated in an attempt to redress an imbalance in the existing literature, which overstates the case for explicitly ternpórary variations in expenditure taxes by applying partial equilibrium analysis to a 'Explicitly temporary investment incentives have been used in several countries during the last few years; these are the subject of a separate investigation (Sumner, 1981). The Ontario Provincial Government rebated to consumers the entire sales tax on new cars purchased between 7 July and 31 December 1975, and reduced the retail sales tax on other spending by 2 percentage points for the period 7 April to 31 December 1975; this episode has been examined elsewhere (Sumner, 1979). 2 number of purchase tax rates was reduced to three in 1972.…”