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The tax cut that failed, cont'd

Earlier today, I called the Making Work Pay tax cut "the tax cut that failed." The White House, you'll be surprised to learn, doesn't agree, and they make their case here. Economic adviser Jared Bernstein also points out that the research finding it less effective than a traditional tax cut uses polling data to ask people whether they spent the money from a tax cut that was designed to be invisible. If the tax cut worked as it was supposed to -- which is to say, people didn't notice it and thus they spent a greater proportion of it -- it wouldn't necessarily show up in that paper.

By Ezra Klein  | October 21, 2010; 2:21 PM ET
 
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Comments

I was thinking the same thing myself when I browsed the research, but I didn't look at it in detail so I thought there was another way that they verified the spending data.

Yeah, writing a report that essentially says "Tax cut designed to be covert results in people not knowing they had a tax cut" isn't particularly interesting when you think about it.

That doesn't mean the tax cut "worked", but it does mean that the paper that you cited does a pretty lousy job at addressing that question.

Posted by: vvf2 | October 21, 2010 2:36 PM | Report abuse

The graph showing real consumer spending in July 2010 had almost recovered to the pre-crash peak in January 2008 is supposed to be reassuring but it isn't given 9.5% unemployment. Just how much of an increase in real consumer spending will be needed to lower the unemployment rate?

Posted by: tuber | October 21, 2010 3:10 PM | Report abuse

Am I the only person in America who filled out a Schedule M this year? I can understand not noticing the change in one's paycheck, but there was a brand new tax form announcing the MWP tax credit that we had to fill out in order to hold on to that extra pay.

Actually, I can't understand not noticing the paycheck change either. I noticed mine right away, and I hardly live paycheck to paycheck.

Posted by: Curudin | October 21, 2010 3:23 PM | Report abuse

"there was a brand new tax form announcing the MWP tax credit that we had to fill out in order to hold on to that extra pay."

If you used TurboTax or similar, or had HR Block do the work, chances are you barely noticed the Schedule M, especially if you e-filed, since the process was little more than checking a box and hitting "Continue".

Posted by: pseudonymousinnc | October 21, 2010 5:38 PM | Report abuse

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