The Economic Growth and Tax Relief Reconciliation Act of 2001: Overview and Assessment of Effects on Taxpayers

Kiefer, Donald W.; Carroll, Robert; Holtzblatt, Janet; Lerman, Allen; McCubbin, Janet; Richardson, David; Tempalski, Jerry

doi:10.17310/ntj.2002.1.06

Cited by 25 publications

(19 citation statements)

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“…We construct the sequence of effective tax schedules implied by the reform based on Kiefer et al (2002). The 2001 rebate was part of a broader tax reform which, beyond decreasing the lowest rate, also reduced all other marginal rates by 3% or more.…”

Section: Role Of Aggregate Economic Conditionsmentioning

confidence: 99%

A Model of the Consumption Response to Fiscal Stimulus Payments

2014

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A wide body of empirical evidence finds that approximately 25 percent of fiscal stimulus payments (e.g., tax rebates) are spent on nondurable household consumption in the quarter that they are received. To interpret this fact, we develop a structural economic model where households can hold two assets: a low-return liquid asset (e.g., cash, checking account) and a high-return illiquid asset that carries a transaction cost (e.g., housing, retirement account). The optimal life-cycle pattern of portfolio choice implies that many households in the model are "wealthy hand-to-mouth": they hold little or no liquid wealth despite owning sizable quantities of illiquid assets. Therefore, they display large propensities to consume out of additional transitory income, and small propensities to consume out of news about future income. We document the existence of such households in data from the Survey of Consumer Finances. A version of the model parameterized to the 2001 tax rebate episode yields consumption responses to fiscal stimulus payments that are in line with the evidence, and an order of magnitude larger than in the standard "one-asset" framework. The model's nonlinearities with respect to the rebate size and the prevailing aggregate economic conditions have implications for policy design.

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Section: Role Of Aggregate Economic Conditionsmentioning

confidence: 99%

A Model of the Consumption Response to Fiscal Stimulus Payments

2014

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“…The timing of the remaining, smaller components in 2001 is independent of the randomized timing of the rebates analyzed here. For more details about the act, see Auerbach (2002), Kiefer et al (2002), and Shapiro andSlemrod (2003a, 2003b). 3 Taxpayers who had filed their year 2000 returns late could receive the rebate later than this, but typically about 92 percent of filers file on time (Slemrod et al 1997).…”

Section: Introductionmentioning

confidence: 99%

The Reaction of Consumer Spending and Debt to Tax Rebates—Evidence from Consumer Credit Data

Agarwal

Souleles

2007

Journal of Political Economy

370

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We use a new panel data set of credit card accounts to analyze how consumers responded to the 2001 federal income tax rebates. We estimate the monthly response of credit card payments, spending, and debt, exploiting the unique, randomized timing of the rebate disbursement. We find that, on average, consumers initially saved some of the rebate, by increasing their credit card payments and thereby paying down debt. But soon afterward their spending increased, We would like to thank the editor and two referees,

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“…The timing of the remaining, smaller components in 2001 is independent of the randomized timing of the rebates analyzed here. For more details about the Act, see Auerbach (2002), Kiefer et al (2002), and Slemrod (2003a and2003b). 3 Taxpayers who had filed their year 2000 returns late could receive the rebate later than this, but typically about 92% of filers file on time [Slemrod et al 1997].…”

Section: Introductionmentioning

confidence: 99%

The Reaction of Consumer Spending and Debt to Tax Rebates - Evidence from Consumer Credit Data

Agarwal

Souleles

2007

SSRN Journal

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The Economic Growth and Tax Relief Reconciliation Act of 2001: Overview and Assessment of Effects on Taxpayers

Abstract: These taxable income levels will be indexed for inflation after 2008. In addition, the Act decreased the tax rates above 15 percent, effective January 1, 2001, as follows: The overall limitation on itemized deductions and the personal exemption phase-out will be reduced by one-third

Cited by 25 publications

References 0 publications

A Model of the Consumption Response to Fiscal Stimulus Payments

A Model of the Consumption Response to Fiscal Stimulus Payments

The Reaction of Consumer Spending and Debt to Tax Rebates—Evidence from Consumer Credit Data

The Reaction of Consumer Spending and Debt to Tax Rebates - Evidence from Consumer Credit Data

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