Tax Cuts for Short-Run Economic Stimulus

Download or read book Tax Cuts for Short-Run Economic Stimulus written by and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the late 1990s, the economy experienced a protracted period of significant growth, and, in the decade prior to that most tax legislation addressed a need for deficit reduction (the objective of most tax change between 1982 and 1997, as was the case in the 1990 and 1993 tax changes) or a desire for structural change (in the 1986 and 1997 tax revisions).1 Very different types of stimulus provisio [...] The rebate proposal provided for the mailing out of checks to taxpayers in the fall of 2001 that were advance reductions for the introduction of a 10% rate bracket for 2001. [...] There was some evidence that temporary rebates in the past were not spent.5 It appears, however, that most of the rebate was spent fairly quickly: at least 20% to 40% in the quarter received and two-thirds by the end of the second quarter after receipt.6 Studies of the 2001 rebate also point to the importance of directing the rebate to households with low incomes and with fewer liquid assets. [...] A tax package proposal that included a business tax cut in the form of reduction in the corporate alternative minimum tax and an acceleration of rate reductions failed to achieve passage in 2001. [...] Among the business tax incentives, a temporary investment subsidy should have the most "bang for the buck."10 By directing the subsidy at investment, the stimulus does not provide a windfall for existing capital.