National Heuristic Shift toward Saving Any Form of Tax Rebate

Abstract

ABSTRACT: Using surveys for the 2008, 2009 and 2011 federal tax rebates, this study tests whether taxpayers (1) noticed the rebates, and (2) spent, rather than saved, a high percentage of each. Results add further evidence that behavioral economics and mental accounting are relevant in predicting tax rebate behavior. It also indicates that rebates distributed in small amounts in take-home pay accomplish stimulus much more effectively than a lump sum, which is critically important for effective public policy. Many taxpayers did not realize they received the 2009 tax rebate, and those who knew spent a higher average percentage than for the 2008 rebate. The results also indicate the need to control for (shifting) savings heuristics during an economic crisis, because this heuristic apparently did change on a national scale. The national economic crisis—particularly unemployment—was smaller and slower to hit the city sampled in this study than for the nation as a whole. The results with the smaller, localized ...