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This article discusses the significant role played by federal taxes in the fiscal policy of the U.S. as of August 2000. Automatic stabilizers are those elements of fiscal policy that tend to mitigate output fluctuations without any explicit government action. From the traditional Keynesian perspective, automatic stabilizers could include any components of the government budget that act to offset fluctuations in effective demand by reducing taxes and increasing government spending in recession, and doing the opposite in expansion. Perhaps the most commonly discussed automatic stabilizer is the federal income tax, which reduces the multiplier effects of demand shocks through the marginal taxation of income fluctuations. A progressive income tax with high marginal tax rates could substantially reduce fluctuations in after-tax income and private spending, without the need for any explicit policy changes. Moreover, automatic stabilizers avoid the slow implementation that can cause discretionary policy to lag so far behind events.