This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window
Open in New Tab
Open in same window
American Economic Journal: Economic Policy: Vol. 4 No. 1 (February 2012)
AEJ: Policy Volume. 4, Issue 1 | 
Previous ArticleNext Article
Sign up for Email Alerts Follow us on Twitter Subscription Information
(Institutional Administrator Access)
AEJ: Policy Forthcoming Articles
Full-text Article
Download Data Set (18.34 MB) | Online Appendix (83.00 KB)
View Comments on This Article (0) | Login to post a comment
Previous ArticleNext Article
Expand
Quick Tools:
Print Article Summary Email Link to this Article Export CitationSign up for Email Alerts Follow us on Twitter Subscription Information
(Institutional Administrator Access)
Explore:
AEJ: Policy Forthcoming Articles
Inertia and Overwithholding: Explaining the Prevalence of Income Tax Refunds
Article Citation
Jones, Damon. 2012. "Inertia and Overwithholding: Explaining the Prevalence of Income Tax Refunds."
American Economic Journal: Economic Policy,
4(1): 158-85.
DOI: 10.1257/pol.4.1.158
DOI: 10.1257/pol.4.1.158
Abstract
Over three-quarters of US taxpayers receive income tax refunds, which are effectively zero-interest loans to the government. Previous explanations include precautionary and/or forced savings motives. I present evidence on a third explanation: inertia. I find that following a change in tax liability, prepayments are only adjusted by 29 percent of the tax change after one year and 61 percent after three years. Adjustment increases with income and experience, and for EITC
recipients, I rule out adjustment greater than 2 percent. Thus, policies
affecting default-withholding rules are no longer neutral decisions, but rather, may affect consumption smoothing, particularly for low-income taxpayers. (JEL D14, H24, K34)
Article Full-Text Access
Full-text Article
Additional Materials
Download Data Set (18.34 MB) | Online Appendix (83.00 KB)
Authors
Jones, Damon (U Chicago)
JEL Classifications
D14: Personal Finance
H24: Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
K34: Tax Law
H24: Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
K34: Tax Law
Comments
View Comments on This Article (0) | Login to post a comment
