It's the multipliers, stupid.
Not all fiscal stimuli act with the same degree of potency. Chart 2 separates the type of stimulus between " investment" and "tax" measures. The governments obtain the greatest bang for the buck when undertaking infrastructure projects, both for their immediate impact on jobs and income as well as for their longer term benefits in adding to productive capacity (e.g. urban transportation systems). Next in importance are stimulus programs generated by increasing government consumption of goods and services (i.e. day-to-day expenses associated with government operations).
Tax measures, on the other hand, have not proven to be anywhere nearly as effective in promoting growth. The impact of reductions in personal or corporate tax cuts are de minimis. Since some portion of a tax cut is usually saved rather than entering the spending stream, tax multipliers are lower than government spending multipliers.
Thus, economists have long urged governments to look to stepping up their capital investment activities as the primary driver of fiscal stimulus policy.Sober Look
Fiscal Policy to the Rescue?