Heartland Monitor Poll

Some Americans Depend on Their Tax Refunds to Survive

The survey reveals that a majority of Americans plan to use their refunds to pay off debt or cover basic necessities.

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Janie Boschma
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Janie Boschma
March 16, 2015, 1:30 p.m.

Amer­ic­ans are gen­er­ally feel­ing more op­tim­ist­ic about the eco­nomy and their own fin­an­cial situ­ations, but many are re­ly­ing on sav­ings from this year’s tax re­funds and low gas prices to cov­er ba­sic ne­ces­sit­ies and pay off debt.

These find­ings from the latest All­state/Na­tion­al Journ­al Heart­land Mon­it­or Poll and fol­low-up in­ter­views with re­spond­ents re­flect the fact that while some seg­ments of the pop­u­la­tion have largely re­covered after the re­ces­sion, many are still strug­gling to cov­er their ex­penses and dig out from un­der years of debt—and see the sav­ings as a wel­come fin­an­cial cush­ion.

More than half of re­spond­ents said they ex­pect to re­ceive a tax re­fund this year. Of those, 82 per­cent said lower fuel prices have made a dif­fer­ence in im­prov­ing their fin­an­cial situ­ations. Thirty-sev­en per­cent of those ex­pect­ing a tax re­fund said they plan to use it to pay off debt, 29 per­cent would save or in­vest it, and 20 per­cent said the money would go to­ward cov­er­ing ba­sic ne­ces­sit­ies. Less than 10 per­cent said they’d spend the ex­tra money on something nice or fun.

De­cisions on how to spend that tax re­fund re­vealed stark con­trasts across race, in­come, and edu­ca­tion levels. While each demo­graph­ic pri­or­it­ized pay­ing off debt, only 36 per­cent of whites said they would use their re­fund to pay bills com­pared to 47 per­cent of black re­spond­ents and 43 per­cent of His­pan­ics. Whites were the most likely to save or in­vest their re­fund—30 per­cent re­por­ted those plans, nearly 10 per­cent­age points high­er than black and His­pan­ic adults. 

Col­lege-edu­cated mil­len­ni­als, many still shoul­der­ing long-term stu­dent loan debt, were the most likely to ex­pect a tax re­fund (74 per­cent). About 40 per­cent said they plan to put their re­fund to­ward pay­ing off loans, about the same share who would pay off debt among those without a col­lege de­gree between the ages of 18 and 64. Bailey Price, a col­lege gradu­ate from Lin­coln, Neb., used her tax re­fund to whittle down her out­stand­ing stu­dent loan debt, which she ex­pects to pay off with­in the next two to three years. Bey­ond debt, her tax re­turn al­lows her fam­ily a bit more free­dom in their budget.

“It’s giv­en us a little more wiggle room for cer­tain things that pop up like a friend’s baby shower, so we can ac­tu­ally af­ford a de­cent present for that, or re­cently we’ve had a couple things go wrong with our car and we were able to pull to­geth­er funds that we wouldn’t have had,” says Price. “It just al­lows us to catch our breath a little bit more.”

The share of adults sav­ing or in­vest­ing their re­fund also in­creased with each in­come brack­et, ran­ging from 20 per­cent of those earn­ing $30,000 or less to 40 per­cent of adults mak­ing $100,000 or more an­nu­ally. Adults with a four-year de­gree aged 40 and older were most likely to save or in­vest their re­funds and more likely to use their re­fund to buy something nice or fun (still only about 12 per­cent).

Adults over the age of 40 without a col­lege de­gree were the most likely group to use their re­fund to pay for ne­ces­sit­ies. Bar­bara Thomas, 58 from Ir­ri­gon, Ore., already spent her tax re­fund on med­ic­al bills from a re­cent sur­gery to re­move can­cer­ous melan­oma. Thomas works sea­son­ally in the fish­ing in­dustry and over the winter, she and her hus­band have tried to stretch his re­tire­ment in­come to cov­er both their reg­u­lar ex­penses and her doc­tor’s ap­point­ments. Any­thing ex­tra that comes their way—wheth­er her re­fund or fuel sav­ings—makes all the dif­fer­ence.

“It just makes it a lot easi­er to make ends meet,” Thomas said. “Liv­ing on so­cial se­cur­ity is tough.”

About three-quar­ters of re­spond­ents re­por­ted sav­ing money from low gas prices re­cently. Just un­der one-third said they’re us­ing those sav­ings to cov­er ne­ces­sit­ies, 27 per­cent are pay­ing off debt or buy­ing less on cred­it, and 19 per­cent are sav­ing or in­vest­ing the dif­fer­ence. Less than 10 per­cent said they are either driv­ing more or buy­ing lux­ury items with their fuel sav­ings.

The im­pact of a lower gas price fol­lowed sim­il­ar pat­terns along ra­cial, in­come, and edu­ca­tion lines. Minor­ity re­spond­ents were more likely to re­port sav­ings at the pump hav­ing a “huge or sig­ni­fic­ant” fin­an­cial im­pact, with 38 per­cent and 35 per­cent of His­pan­ic and black re­spond­ents, re­spect­ively, com­pared to 30 per­cent of whites.

Sean Adams, a 23-year-old Afric­an-Amer­ic­an who works for the gov­ern­ment near Vir­gin­ia Beach, Vir­gin­ia, said lower gas prices have made a huge dif­fer­ence for his budget. He’s used the sav­ings to pay off bills and buy ne­ces­sit­ies he put off while the fuel price was so high and filling his tank trumped oth­er ex­penses.

“You shouldn’t be mak­ing life de­cisions at the pump,” says Adams, “but you do what you have to do. You have to get to work.”

Par­ents with school-aged chil­dren were more likely to feel the im­pact of cheap­er fuel (62 per­cent), com­pared to par­ents with adult chil­dren (50 per­cent) and non-par­ents (54 per­cent).

Kim­berly McDaniel, a nurs­ing stu­dent from Nacog­doches, Texas, says lower gas prices have cut her monthly fuel bill by more than half. She had been spend­ing about $300 monthly to com­mute to med­ic­al school and to pick up her kids at school; now she only spends about $120.

A di­vorced moth­er of three, McDaniel says she’s used her tax re­fund and fuel sav­ings to help provide for her chil­dren, and pay off her mort­gage and car pay­ments while she’s study­ing full-time.

“I’m ba­sic­ally hav­ing to use that to pay bills and everything to make it through,” she says. “There’s no ex­tra spend­ing go­ing on right now. In a nor­mal situ­ation if I were still work­ing and not go­ing to school, we would have more money to spend money on oth­er things, like go­ing to the movies or tak­ing them skat­ing.”

The latest All­state/Na­tion­al Journ­al Heart­land Mon­it­or Poll is the 22nd in a series ex­amin­ing how Amer­ic­ans are ex­per­i­en­cing the chan­ging eco­nomy. This poll, which ex­plored how Amer­ic­ans rate con­di­tions in their com­munit­ies and wheth­er they prefer loc­al or na­tion­al in­sti­tu­tions to take the lead in re­spond­ing to the coun­try’s chal­lenges, sur­veyed 1,000 adults by land­line and cell phones from Feb. 18 through 22, 2015. The sur­vey has a mar­gin of er­ror of plus or minus 3.1 per­cent­age points. The sur­vey was su­per­vised by Ed Re­illy and Jeremy Ruch of FTI Con­sult­ing’s Stra­tegic Com­mu­nic­a­tions prac­tice.

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