Nearly every adult American with a job knows that the “Bush” tax cuts were extended into 2012. The general understanding of most people who have deductions taken out of their pay is that they will take home more money that they would have if the tax cuts expired. Nonetheless, the implications of the policy are complex and are probably not understood by most Americans.
24/7 Wall St and Harris Interactive wanted to gauge how much benefits most Americans expect to get from the extension of the tax cuts and Unemployment Insurance that was so bitterly debated by the U.S. Congress. Most Americans apparently aren’t feeling like they got much of a windfall. They also did not understand many of the benefits that they will get.
The 24/7 Wall St/Harris Poll On Tax Cuts & Consumer Spending of 2,364 adults indicates that people will use their tax breaks to pay down debt and cover daily expenses. That means there will be little rise in consumer discretionary spending in the first half of this year. It is that spending which was to be an important part of GDP recovery.
While most people polled understand that unemployment and tax cut benefits have been extended, 47% of those asked were not familiar with the lower amount they will pay in into Social Security. The primary reason for this could be that people do not differentiate among the deductions they pay. Workers who have deductions taken out of their checks many not separate Social Security from federal taxes.
Of course it makes sense that older people are more likely to be familiar with the Social Security contribution change. They are closer to age, or at the age, when they receive benefits from the fund. Fifty-six percent of those 45 to 54 said they were somewhat or very familiar with the changes. The figure rose to 70 percent among people 55 years old and above.
The data from the poll that could lead readers to think the consumer spending recovery is still far off. Fifty two percent of people said that they are likely to use the money from tax cuts to pay down debt. This indicates that consumers are still over-leveraged as they have been since before the recession. That leverage may actually have increased due to holiday spending. Forty-six percent said they would use the money for everyday spending. Wages have not kept pace with the everyday needs of many Americans. Only 19% of those polled said they would use the money to make a specific purchase like a car, home, or jewelry.
In sum, Americans do not understand the current tax code terribly well. They only focus on the effects on Social Security as they grow older. And, the money that is put in their pockets this year because of the federal government’s tax decision will no be going into the economy as consumer discretionary spending.