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33 Tax Pol'y & Econ. xiii (2019)

handle is hein.journals/txpeco33 and id is 1 raw text is: Introduction Robert A. Moffitt, Johns Hopkins University and NBER The five papers in this issue of Tax Policy and the Economy are all directly related to important issues concerning the US tax system and its transfer system, their relationship to fiscal policy, and issues related to equiva- lences of alternative tax policies. In the first paper, Baker, Kueng, McGranahan, and Melzer note that some macroeconomist theorists have suggested that consumer spending might be stimulated during a recession by government announcements of future sales or consumption tax increases, thereby inducing house- holds to shift consumer expenditures forward to periods with lower taxes. Such unconventional fiscal policies, which require that house- holds have significant intertemporal elasticities during downturns, have not been empirically examined. The authors do so in their paper by ex- amining how purchases of automobiles are affected by preannounced changes in sales taxes. Autos are a consumer durable and require financ- ing and are an interesting case because durables may be one of the more difficult consumer products to intertemporally substitute, especially dur- ing a recession. Using a credit panel on car purchases compiled by the New York Federal Reserve Bank, allowing examination of car purchases over the period 1999-2017 at the zip-code level, the authors find that cur- rent car sales increase by a large 8% for each 1-percentage-point increase in the future tax rate, with the increase concentrated in the month just be- fore the tax increase. They also find the response to be largest among those with high credit scores and, perhaps surprisingly, to be larger dur- ing recessions than during normal periods. Finally, the authors find that the intertemporal substitution is fully unwound in the month following the sales increase by a corresponding decline in sales, but they suggest that tax increases relevant for national fiscal policy would be consider- ably larger and potentially have longer-run impacts. © 2019 by the National Bureau of Economic Research. All rights reserved. 978-0-226-64586-5/2019/2019-0002$10.00