Bucks Blog: Worried About Taxes, Some Consumers Cut Back

As time ticks away for a resolution to the so-called fiscal cliff mess, some consumers aren’t taking any chances.

About one in three Americans has cut back on personal spending over the last month or so because of worries about the impact on the economy — and their pocketbooks — if an agreement isn’t reached, a survey from Bankrate.com finds.

But despite all the drama, drastic belt-tightening seems premature to me. Some economists argue that the impact of the “fiscal cliff” — shorthand for a combination of automatic tax increases and spending cuts that will take effect unless the government acts — will probably be felt gradually, rather than all at once. And the impact of cuts on the military and other programs can be mitigated, if Congress gets its act together relatively early in 2013. Meanwhile, the economy appears to be gaining steam. The unemployment rate has fallen to 7.7 percent, and the housing market continues to recover.

It’s true, though, that some effects, including a two percentage point increase in the payroll tax and the end of unemployment benefits for more than two million people — would be felt right away. And those two hits may weigh most heavily on consumers who are most likely to say they’re cutting back. Consumers most inclined to have cut their spending over the last 30 days, the survey found, include those with annual income under $30,000 and those with no more than a high school diploma.

“The risks of going over the fiscal cliff are beginning to resonate with consumers much the way they have with businesses that have held back in recent months,” Greg McBride, Bankrate’s senior financial analyst, said in a statement.

The telephone survey of 1,001 adults was conducted by Princeton Survey Research Associates International from Dec. 6 to 9. The margin of sampling error is plus or minus four percentage points.

Are you cutting back on spending because of worries about the tax situation? What steps have you taken?

Article source: http://bucks.blogs.nytimes.com/2012/12/26/worried-about-taxes-some-consumers-cut-back/?partner=rss&emc=rss