Tax Refunds to Savings?

Tax season, a time of celebratory credit or sometimes miscalculated debt, means more than compiling a list of deductions to hand over to the accountant. For retailers, it typically means increased sales, as consumers go out to spend some unexpected money provided by their tax refund. According to NRF’s Tax Returns Consumer Survey conducted by BIGinsight, retailers should not expect an early spring spending spree. This year, 43.8 percent of those expecting refunds will stash some of the cash as savings, up from 42.l percent last year, and the most in the survey’s nine year history. While retailers are optimistic, with two-thirds (66.2 percent) of tax payers expecting a refund this year, the exact same as last year, the survey reveals that many Americans have other plans for their money.

Tax Refunds Not for Retail Sales

Nearly four in 10 Americans expecting a tax refund will use some of the money to pay down debt, and 28.7 percent plan to use their “free cash” for everyday expenses. A few will throw caution to the wind and use their refund for a major purchase, such as a car or new television (12.3 percent) and vacation (11.3 percent). There is a positive takeaway, says NRF president and CEO, Matthew Shay, explaining, “Increased consumer savings proves extremely beneficial to shoppers and businesses in the long run, allowing future opportunities to invest in a large household item, or even take advantage of a well deserved family vacation.”

In fact, Americans are eager to get a jump on their savings, as 64.4 percent of them will have filed their taxes by the end of February; the highest percentage since 2006, the survey says. Only 14 percent say they will wait until the last minute. While retailers may not see the benefits of tax season, consumers do. Retailers may just have to wait for a rainy day before savings turns into spending.