Lessons in Cyclical Fiscal Activism

Abstract

This Article highlights an anomaly. It tells a story of two tax rules that were introduced at the same time to achieve a similar goal. Both were meant to be temporary and stimulate economic growth but received dramatically different outcomes. The Article reviews the reasons for this paradox. It demonstrates that the causes are structural, ideological, and political. It argues that the historical support the two mechanisms received diverged in accordance with their complexity, the perceptions they epitomized, and their instrumental role in society. The Article not only enriches an important and ongoing debate on the role of the tax system in our society that has received much attention in recent years, but also provides important historical insights to policymakers.