Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93661
Authors: 
Graziani, Grant
van der Klaauw, Wilbert
Zafar, Basit
Year of Publication: 
2013
Series/Report no.: 
Staff Report, Federal Reserve Bank of New York 592
Abstract: 
This paper presents new survey evidence on workers' response to the 2011 payroll tax cuts. While workers intended to spend 10 to 18 percent of their tax-cut income, they reported actually spending 28 to 43 percent of the funds. This is higher than estimates from studies of recent tax cuts, and arguably a consequence of the design of the 2011 tax cuts. The shift to greater consumption than intended is largely unexplained by presentbias or unanticipated shocks, and is likely a consequence of mental accounting. We also use data from a complementary survey to understand the heterogeneous tax-cut response.
Subjects: 
tax cuts
consumption
liquidity constraints
mental accounts
permanentincome hypothesis
present-bias
JEL: 
C83
D91
E21
E62
E65
Document Type: 
Working Paper

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