Seven in 10 Americans Cut Spending Due to Payroll Tax Change
WASHINGTON, D.C. -- A change in federal tax law that decreased the take-home pay of many working Americans is impacting household budgets. According to the National Retail Federation's (NRF) 2013 Tax Returns Survey conducted by BIGinsight, 73.3 percent of those polled say their spending plans have taken a hit since the payroll tax increase went into effect on Jan. 1.
When asked how the new federal tax laws have affected their spending, saving and budgeting, 58.2 percent said their plans have been either somewhat or greatly impacted.
Specifically, 45.7 percent said they will spend less overall, and 35.6 percent will watch for sales more often. Additionally, one-third will reduce how much they dine out and 24.5 percent will spend less on “little luxuries,” such as trips to coffee shops, manicurists and for high-end cosmetic items.
Of those greatly impacted, nearly half (49.2 percent) said they 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 said they will contribute less to savings, while 46.4 percent will comparison shop more often and 54.4 percent will spend less on clothing, the NRF survey results showed.
Of individuals that say the paycheck decreases will have little to no impact, many will still alter their spending habits. Of this group, 22.4 percent said 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 also found that half (50 percent) of those who make less than $50,000 a year said they will spend less overall. Among this group, 23.2 percent will spend less on groceries, compared to 16.7 percent of consumers who make more than $50,000 a year. Additionally, 27.6 percent will shop at discount stores more often, compared to 19.7 percent of adults making more than $50,000.