Keywords: JGTRRA, tax policy, consumer spending
Abstract: The Jobs and Growth Tax Relief and Reconciliation Act of 2003 has been described as
textbook fiscal stimulus. Using household survey data on the self-reported qualitative
response to the tax cuts, we estimate that the boost to aggregate personal consumption
expenditures from the child credit rebate and the reduction in withholdings raised the
average level of real GDP in the second half of 2003 by 0.2 percent and by 0.3 percent
in the first half of 2004. We also show that households in the survey were well aware
of their tax cuts and tended to spend equally out of the child credit rebate and the
reduced withholdings, a result that is contrary to the conventional wisdom.
Full paper (112 KB PDF)
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Last update: September 7, 2005