With take home pay increasing an average of 2 percent beginning in January, workers are split on what they will do with the savings, according to a consumer spending tracker.
According to a recent survey by the International Council of Shopping Centers and Goldman Sachs, 27 percent of consumers are unsure how or if they’ll spend the extra cash. The survey, conducted by MarketTools Inc., also found:
- 26 percent said they were likely to use the money to pay down outstanding debt.
- 22 percent anticipated they would save most of the money.
- 16 percent said they would probably spend some of it.
- 9 percent plan to spend most of it.
The split is likely because of the temporary nature of the income boost, said Michael P. Niemira, ICSC’s vice president for research and chief economist.
“While economic theory generally posits that consumers will spend some of the money … the consumers’ ‘propensity to spend’ from temporary disposable income will be smaller than if the reduction was permanent,” he said.
The tax break included in the Tax Relief, Unemployment Insurance Authorization, and Job Creation Act of 2010 expires at the end of 2011. The lower rate would boost paychecks by about $800 for those who earn $40,000 per year; those who more than $106,800 would save a maximum of $2,136 on taxes.
