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% will watch for sales more often. Additionally, one-third (33.5%) will reduce how much they dine out and 24.5% 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% will reduce the amount they dine away from home; another 43.4% say they will contribute less to savings, 46.4% will comparison shop more often, and 54.4% 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% say they will spend less overall, and 15.8% will use coupons more often. An additional 11.1% will reduce their entertainment plans, 11.6% will cut back on vacation and travel plans, and 17.9% will watch for sales more often.
HALF OF THOSE MAKING LESS THAN $50,000 WILL SPEND LESS OVERALL
The survey found that half (50.0%) of those who make less than $50,000 a year say they will spend less overall. Additionally, 23.2% will spend less on groceries, compared to 16.7% of consumers who make more than $50,000 a year, and 27.6% will shop at discount stores more often, compared to 19.7% of adults making more than $50K.
MANY AMERICANS HAVE ALREADY FILED THEIR TAXES; MOST ADULTS WILL PUT REFUND IN SAVINGS
According to the survey, tax season is in full swing; three in 10 Americans (29.2%) say they have already filed their returns as of February 13 and another 29.2% will have filed by the end of the month. More than one-quarter (27.4%) will file in March and 14.2% will wait until the deadline and file in April.
Unsurprisingly, of those who say the payroll tax changes have had a great impact on their spending and budget plans, three in 10 (31.1%) have already filed.
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% say they will use the money to pay down debt, 44.0% will put it into savings and 29.7% 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% of those expecting a refund say they will pay down debt, and 40.2% will put their refund towards 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.”
ONLINE TAX PREPARATION GROWS, MOST WILL USE COMPUTER SOFTWARE TO FILE TAXES
When it comes to how Americans will file their taxes, the number of people who file their taxes online continues to increase. This year, 62.5% of U.S. taxpayers will file their taxes online, up from 60.7% last year and the most in the survey’s history. Additionally, 37.3% will prepare their taxes using computer software, 20.2% will use an accountant, 18.8% will use a tax preparation service, and 14.0% will prepare by hand.[Source: "2013 Tax Returns Survey." National Retail Federation (NRF)/BIGinsight. 21 Feb. 2013. Web. 21 Feb. 2013.]