Workers' Spending Response to the 2011 Payroll Tax Cuts
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(Complimentary)
Abstract
This paper investigates workers' spending response to the 2011 payroll tax cuts. Respondents were surveyed at the beginning and end of 2011, which allows the comparison of ex ante and ex post reported use of the extra income. While workers on average intended to spend 14 percent of their tax cut income, they ex post reported spending 36 percent of the funds. This pattern of higher spending ex post is shared across all demographic groups. Differences across workers in this shift to greater ex post spending are largely unexplained by differences in either present bias or unanticipated shocks, so in the end the upward revision in spending remains a puzzle.Citation
Graziani, Grant, Wilbert van der Klaauw, and Basit Zafar. 2016. "Workers' Spending Response to the 2011 Payroll Tax Cuts." American Economic Journal: Economic Policy, 8 (4): 124-59. DOI: 10.1257/pol.20140065Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- D15 Intertemporal Household Choice; Life Cycle Models and Saving
- E21 Macroeconomics: Consumption; Saving; Wealth
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H31 Fiscal Policies and Behavior of Economic Agents: Household
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