Spending responses to high-frequency shifts in payment timing evidence from the earned income tax credit by Aditya Aladangady ... [et al.]
Contributor(s): Aladangady, Aditya
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Material type: 
ArticleSubject(s): POLITICA FISCAL | INGRESOS FISCALES | RENTA | IMPUESTOS | BONIFICACIONES TRIBUTARIAS | ESTADOS UNIDOS
In:
American Economic Journal : Economic Policy v. 15, n. 3, August 2023, p. 89-114Summary: This study explores the spending response to tax refunds for Earned Income Tax Credit recipients using a novel dataset combining transaction-based measures of retail spending with administrative IRS data on tax refunds. Our dataset allows us to exploit variation in the timing of EITC refunds, including changes related to the 2017 PATH Act, along with cross-state differences in refund magnitudes to identify spending responses. Results show EITC recipients spend about $0.30 per refund dollar ($1,150 for the average refund) within just two weeks of issuance, suggesting stimulus targeted at this population may provide a quick boost to aggregate demand.
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| OP 2135/2023/3 American Economic Journal : Economic Policy | OP 2135/2023/3-1 Sin taxes and self-control | OP 2135/2023/3-2 Common practice | OP 2135/2023/3-3 Spending responses to high-frequency shifts in payment timing | OP 2135/2023/3-4 How Social Security reform affects retirement and pension claiming | OP 2135/2023/3-5 Corporate tax breaks and executive compensation | OP 2135/2023/4 American Economic Journal : Economic Policy |
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This study explores the spending response to tax refunds for Earned Income Tax Credit recipients using a novel dataset combining transaction-based measures of retail spending with administrative IRS data on tax refunds. Our dataset allows us to exploit variation in the timing of EITC refunds, including changes related to the 2017 PATH Act, along with cross-state differences in refund magnitudes to identify spending responses. Results show EITC recipients spend about $0.30 per refund dollar ($1,150 for the average refund) within just two weeks of issuance, suggesting stimulus targeted at this population may provide a quick boost to aggregate demand.
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