Payroll Tax Changes Denting Consumer Spending
Published in CSP Daily News
Seven in 10 Americans adjusting plans to cope with smaller paychecks
WASHINGTON -- A change in federal tax law that decreased the take-home pay of many working Americans is impacting household budgets. According to the 2013 Tax Returns Survey conducted by BIGinsight for the National Retail Federation (NRF), 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.
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% 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 $50,000.
"Americans are extremely mindful of how they spend their hard-earned money these days," 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."
The NRF 2013 Tax Returns survey gauges consumer behavior and shopping trends related to tax returns. The poll of 5,185 consumers was conducted from Feb. 5-13, 2013. The consumer poll has a margin of error of plus or minus 1.4 percentage points.