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

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 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:

    http://onlinelibrary.wiley.com/doi/10.1111/j.1745-6606.1984.tb00322.x/abstract
    http://www.nber.org/digest/mar09/w14753.html
    http://www.kellogg.northwestern.edu/faculty/parker/htm/research/johnsonparkersouleles2005.pdf
    http://finance.wharton.upenn.edu/~rlwctr/papers/0801.pdf

    Reply

  2. runDOGrun Says:

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

    Reply

  3. Jbh Says:

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

    Reply

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>