March 6, 2005
New York Times?"Taking Your Money, Giving Some Back, and Making You Love It"
""I bought a computer, and the box was thrown out," recalled William Ahern, director of communications for the Tax Foundation, a business-backed research group. "Companies can count on a high incidence of rebates not being redeemed. With the government, that won't be the case." What government cannot dictate, though, is how consumers spend the money. In 2001, federal tax rebates were intended to stimulate a sluggish economy, but when Professor Slemrod surveyed Americans to find out what they would do with their $300 or $600 checks, he found that most intended to save them rather than spend them. Are rebates more meaningful politically than economically? "Yes," Mr. Ahern said. "They are not only insignificant economically, but they are very problematic even as a promotional device." "The whole thing backfired on the Bush administration," he recalled, "because too many people perceived that the $300 or $600 federal 'prebate' they received was the tax cut. I know of people getting $2,000 in tax relief every year, but they still think the tax cut was $300 in 2001.""
