Nearly every adult American with a job knows that the "Bush" tax cuts were extended into 2012. Those subject to pay deductions generally understand that they will take home more money than they would have if the cuts expired, according to a new poll conducted by 24/7 Wall St and Harris Interactive. Nonetheless, the implications of the policy are complex and are do not appear to be understood by most Americans.
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24/7 Wall St and Harris Interactive wanted to gauge how much benefit most Americans expect to get from the extension of the tax cuts and unemployment insurance, which was bitterly debated by Congress. Most Americans appear to feel like they didn't get 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 most people will use their tax breaks to pay down debt, cover daily expenses, and add to saving/investment. That means there will be little rise in consumer discretionary spending in the first half of this year due to the tax cuts. Such spending is supposed to play an important part in the economic recovery.
While most people polled understand that unemployment and tax cut benefits have been extended, 47% of those surveyed were not familiar with the Social Security contribution changes that will result in paying lower taxes. This may be due in large part to people failing to differentiate Social Security deductions from the other taxes they pay.
Of course, it makes sense that older people are more likely to be familiar with the Social Security contribution change. They are closer to the age, or at the age, when they receive benefits from the government. Fifty-six percent of those aged 45 to 54 said they were somewhat or very familiar with the changes. The figure rose to 70 percent among Americans 55 years of age and older.
The data from the poll imply that the consumer spending recovery may still be far off. Fifty two percent of those polled said that they are likely to use the money from tax cuts to pay down debt. This appears to indicate that consumers still feel over-leveraged. Their debt may actually have increased due to holiday spending. Forty-six percent said they would use the tax cut 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.
The poll teaches us that Americans do not understand the current tax code very well. Most people begin to pay attention to Social Security deductions only as they grow older. Finally, most of the money put in Americans' pockets this year because of the federal government's tax cuts will not hit the economy as consumer discretionary spending.