Tax season is here, and millions of Americans are preparing for the April 15 filing deadline. For many, tax season is a time of great stress; for others it’s a time to start thinking about what to do with the extra hard-earned money. But recent changes in federal tax law that decrease the take-home pay of many working Americans have thrown a wrench into how some families plan to use the refund Uncle Sam will send them.
NRF’s latest Tax Returns Survey conducted by BIGinsight found that overall, nearly three-quarters (73 percent) of U.S. taxpayers say they have had to adjust their spending plans because of the payroll tax changes. Fifty-eight percent say they have been either “somewhat” or “greatly” affected by the tax increase.
As financial stability remains a priority for Americans during this sputtering economic recovery, many have actually reverted to bolstering their emergency funds as opposed to spending their tax refunds on vacation, everyday expenses or even paying down debt. According to the survey, four in 10 said they will put their refunds into savings this year, the highest percentage in the survey’s 10-year history. Of those who say they are greatly impacted by the new tax law, 48 percent will try to improve their long-term financial standing by paying down debt.
Of course, some are more affected by these budgetary changes than others. In fact, 41 percent of those polled said the new federal tax laws have had little to no impact on their spending, saving or budget plans. That said, our data shows that this group of Americans are in fact paying close attention to what’s happening in Washington and with the economy. The survey found:
- 22 percent say they are still spending less overall
- 15 percent are using coupons more often
- 17 percent are shopping for sales more often
- Nearly one in five (16 percent) are reducing how much they dine out, and 11 percent say they are reducing their entertainment plans
- 13 percent are trimming their budgets for what they spend on clothing
With years of practice, retailers will use the next few weeks to remind shoppers about all the money-saving deals, hoping to attract those who want to buy new spring merchandise. Walmart is even reminding people to “get more with their refund.”
It remains to be seen how long the impact of the payroll taxes will last. Like high gas prices, consumers are finding ways to adjust to this “new normal.” But one thing remains true, as NRF President and CEO Matthew Shay said, “We cannot grow the nation’s economy until consumers consume.”