Americans Adjust Spending to Cope with Tax Changes
A change in federal tax law that decreased the take-home pay of many working Americans is impacting household budgets. According to NRF’s 2013 Tax Returns Survey conducted by BIGinsight, nearly three-quarters (73.3%) of those polled say their spending plans are taking a hit.
“We cannot grow the nation’s economy until consumers consume. A smaller paycheck due to the fiscal cliff deal early last month, higher gas prices, low consumer confidence and ongoing uncertainty about our nation’s fiscal health is negatively impacting consumers and businesses across the country,” said NRF President and CEO Matthew Shay. “Every day we hear about building the middle class. We can only do that if we tear down barriers that prevent consumers from investing their hard-earned money back into our nation’s economy. It’s really that simple.”
When asked how the new federal tax laws have affected spending, saving or budgeting of their households, nearly six in 10 (58.2%) of those polled say their plans have been either somewhat or greatly impacted. Specifically, nearly half (45.7%) say they will spend less overall, and 35.6 percent will watch for sales more often. Additionally, one-third (33.5%) will reduce how much they dine out, and 24.5 percent will spend less on “little luxuries,” such as trips to coffee shops, manicures and high-end cosmetic items.
Of those greatly impacted, nearly half (49.2%) will delay major purchases, such as a car, TV or furniture, and 58.2 percent will reduce the amount they dine away from home; another 43.4 percent say they will contribute less to savings, 46.4 percent will comparison shop more often, and 54.4 percent will spend less on clothing.
Of individuals that say the paycheck decreases will have little to no impact, many will still alter their spending habits. According to the survey, of this group, 22.4 percent say they will spend less overall, and 15.8 percent will use coupons more often. An additional 11.1 percent will reduce their entertainment plans, 11.6 percent will cut back on vacation and travel plans, and 17.9 percent will watch for sales more often.
The survey found that half (50%) of those who make less than $50,000 a year say they will spend less overall. Additionally, 23.2 percent will spend less on groceries, compared to 16.7 percent of consumers who make more than $50,000 a year, and 27.6 percent will shop at discount stores more often, compared to 19.7 percent of adults making more than $50K.
The survey found nearly two-thirds (65.8%) of consumers are expecting a refund from Uncle Sam this year, and when asked how they plan to spend their refund, 37.2 percent say they will use the money to pay down debt, 44.0 percent will put it into savings and 29.7 percent will use it for everyday expenses.
Looking at the group whose spending plans have been greatly impacted by payroll tax changes — a hefty 48.1 percent of those expecting a refund say they will pay down debt, and 40.2 will put their refund toward savings.
“Americans are extremely mindful of how they spend their hard-earned money these days, and that includes any refund they may get back from their taxes,” said BIGinsight Consumer Insights Director Pam Goodfellow. “Thanks to years of practice stemming from high gas and food prices, and an uncertain economy, families will adjust to the changes in their take-home pay by purchasing generic brands, searching for coupons, downgrading on services like cable and internet and re-evaluating their overall spending habits.”
About the Survey
The NRF 2013 Tax Returns survey, conducted for NRF by BIGinsight, was designed to gauge consumer behavior and shopping trends related to tax returns. The poll of 5,185 consumers was conducted from February 5-13, 2013. The consumer poll has a margin of error of plus or minus 1.4 percentage points.
“We cannot grow the nation’s economy until consumers consume. A smaller paycheck due to the fiscal cliff deal early last month, higher gas prices, low consumer confidence and ongoing uncertainty about our nation’s fiscal health is negatively impacting consumers and businesses across the country,” said NRF President and CEO Matthew Shay. “Every day we hear about building the middle class. We can only do that if we tear down barriers that prevent consumers from investing their hard-earned money back into our nation’s economy. It’s really that simple.”
When asked how the new federal tax laws have affected spending, saving or budgeting of their households, nearly six in 10 (58.2%) of those polled say their plans have been either somewhat or greatly impacted. Specifically, nearly half (45.7%) say they will spend less overall, and 35.6 percent will watch for sales more often. Additionally, one-third (33.5%) will reduce how much they dine out, and 24.5 percent will spend less on “little luxuries,” such as trips to coffee shops, manicures and high-end cosmetic items.
Of those greatly impacted, nearly half (49.2%) will delay major purchases, such as a car, TV or furniture, and 58.2 percent will reduce the amount they dine away from home; another 43.4 percent say they will contribute less to savings, 46.4 percent will comparison shop more often, and 54.4 percent will spend less on clothing.
Of individuals that say the paycheck decreases will have little to no impact, many will still alter their spending habits. According to the survey, of this group, 22.4 percent say they will spend less overall, and 15.8 percent will use coupons more often. An additional 11.1 percent will reduce their entertainment plans, 11.6 percent will cut back on vacation and travel plans, and 17.9 percent will watch for sales more often.
The survey found that half (50%) of those who make less than $50,000 a year say they will spend less overall. Additionally, 23.2 percent will spend less on groceries, compared to 16.7 percent of consumers who make more than $50,000 a year, and 27.6 percent will shop at discount stores more often, compared to 19.7 percent of adults making more than $50K.
The survey found nearly two-thirds (65.8%) of consumers are expecting a refund from Uncle Sam this year, and when asked how they plan to spend their refund, 37.2 percent say they will use the money to pay down debt, 44.0 percent will put it into savings and 29.7 percent will use it for everyday expenses.
Looking at the group whose spending plans have been greatly impacted by payroll tax changes — a hefty 48.1 percent of those expecting a refund say they will pay down debt, and 40.2 will put their refund toward savings.
“Americans are extremely mindful of how they spend their hard-earned money these days, and that includes any refund they may get back from their taxes,” said BIGinsight Consumer Insights Director Pam Goodfellow. “Thanks to years of practice stemming from high gas and food prices, and an uncertain economy, families will adjust to the changes in their take-home pay by purchasing generic brands, searching for coupons, downgrading on services like cable and internet and re-evaluating their overall spending habits.”
About the Survey
The NRF 2013 Tax Returns survey, conducted for NRF by BIGinsight, was designed to gauge consumer behavior and shopping trends related to tax returns. The poll of 5,185 consumers was conducted from February 5-13, 2013. The consumer poll has a margin of error of plus or minus 1.4 percentage points.