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Julie Garber

Survey Says: End of Payroll Tax Cut Will Reduce Spending

By February 27, 2013

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As many are learning, the payroll tax cut that was enacted as part of the 2010 Tax Relief Act and resulted in a 2% reduction in the Social Security portion of FICA taxes for 2011 and 2012 was not extended by the fiscal cliff deal. This has resulted in smaller paychecks for the majority of American taxpayers beginning on January 1, 2013, and, as a result, consumers have indicated that are significantly changing their spending habits. In a survey of 5,185 consumers conducted February 5 - 13, the National Retail Foundation found the following:

  • 54.4% will spend less on clothing
  • 49.2% will delay major purchases, such as a car, TV or furniture
  • 43.4% will contribute less to savings
  • 45.7% will spend less overall
  • 35.6% will watch for sales more often
  • 33% will dine out less
  • 23.2% will spend less on groceries

According National Retail Foundation President and CEO Matthew Shay, "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." No kidding.

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