The Effect of Tax Rebates on Consumption Expenditures: Evidence from State Tax Rebates‪.‬

INTRODUCTION Tax rebate policies have often been discussed as a tool that the government may use to stimulate consumer spending and, so the hope goes, boost the economy in general. However, the efficacy of tax rebates to stimulate consumer spending is still an open question, both theoretically and empirically. This paper estimates the consumption response to a series of state rebates distributed between 1995-2001 using data from the Consumer Expenditure Survey.