The Center of the Universe

St Croix, United States Virgin Islands

MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Federal Reserve Bank of New York on payroll tax multiplier

Posted by WARREN MOSLER on January 4th, 2013

>   (email exchange)
>   On Fri, Jan 4, 2013 at 1:20 PM, Scott wrote:
>   Apparently payroll tax cuts work. Who knew? (We did.)

Thanks, Scott!
Likewise the expiration might be more of a drag than anticipated.

A Boost in the Paycheck: Survey Evidence on Workers’ Response to the 2011 Payroll Tax Cuts

By Grant Graziani, Wilbert van der Klaauw, and Basit Zafar


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 present-bias 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.

3 Responses to “Federal Reserve Bank of New York on payroll tax multiplier”

  1. Ralph Musgrave Says:

    Other studies into other tax cuts and income increases have produced similar results:


  2. runDOGrun Says:

    Perhaps they should talk to Olivier Blanchard, but what the heck do I know? Economics is hard.


  3. Jbh Says:

    We could use more tax cuts, much more, especially if you want to increase govt revenue significantly over the next decade.


Leave a Reply

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>