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Board of Governors of the Federal Reserve System (US)
Finance and Economics Discussion Series
The household spending response to the 2003 tax cut: evidence from survey data
Julia Lynn Coronado
Joseph P. Lupton
Louise Sheiner
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.


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Julia Lynn Coronado & Joseph P. Lupton & Louise Sheiner, The household spending response to the 2003 tax cut: evidence from survey data, Board of Governors of the Federal Reserve System (US), Finance and Economics Discussion Series 2005-32, 2005.
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Keywords: Consumption (Economics) ; Tax credits ; Finance; Personal
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