A majority of consumers say they are making adjustments to their spending following the end of a payroll tax cut.
More than 70 percent of those asked in a recent survey said their spending plans are taking a hit following the end of the tax cut, which was not renewed as part of the so-called “fiscal cliff” deal in January, according to the National Retail Federation’s tax survey, conducted by BIGinsight.
The change in spending plans also comes along with a sharp rise in gas prices.
“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.
Shay said the only way to help the middle class thrive is to “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 the spending, saving or budgeting of their households, 58.2 percent of those polled say their plans have been either somewhat or greatly impacted.
Specifically, 45.7 percent say they will spend less overall, and 35.6 percent will watch for sales more often.
To make up for the difference in take-home pay, more than 33 percent will dine out less and won’t stop at the coffee shop or get manicures as often, the survey showed.
Almost half of those asked (49.2 percent) plan to delay major purchases, such as a car, TV or furniture, while 43.4 percent say they will contribute less to savings, and 54.4 percent will spend less on clothing.
The survey found that exactly half 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.
The survey found nearly two-thirds of consumers are expecting a tax refund this year — 37.2 percent use their refund to pay down debt, 44 percent will put it into savings and 29.7 percent will use it for everyday expenses.
When looking specifically at the group whose spending plans have been greatly affected by payroll tax changes, 48.1 percent of those expecting a refund say they will pay down debt and 40.2 will put their refund toward savings.
When it comes how people are filing their taxes, the number of people who file online continues to increase.
This year, 62.5 percent of taxpayers will file their taxes online, up from 60.7 percent last year and the most in the survey’s history.
Additionally, 37.3 percent will prepare their taxes using computer software, 20.2 percent will use an accountant, 18.8 percent will use a tax preparation service and 14 percent will prepare by hand.
The survey 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 with a margin of error of 1.4 percentage points.
Source: The Hill