TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, April 23, 2004

House & Shapiro on Phased-In Tax Cuts

Saturday, April 24, 2004

Christopher House (Michigan) & Matthew Shapiro (Michigan) have posted Phased-In Tax Cuts and Economic Activity on SSRN. Here is the abstract:

Phased-in tax reductions are a common feature of tax legislation. This paper uses a dynamic general equilibrium model to quantify the effects of delaying tax cuts. According to the analysis of the model, the phased-in tax cuts of the 2001 tax law substantially reduced employment, output, and investment during the phase-in period. In contrast, the immediate tax cuts of the 2003 tax law provided significant incentives for immediate production and investment. The paper argues that the rules and accounting procedures used by Congress for formulating tax policy have a significant impact in shaping the details of tax policy and led to the phase-ins, sunsets, and temporary tax changes in both the 2001 and 2003 tax laws.

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