Americans buy less food when they have to pay Uncle Sam

If tax season always resulted in people getting a refund, then maybe the public wouldn’t hate it so much.

In addition to seeing smaller paychecks every week as they pay taxes throughout the year, millions of Americans have to pay even more to the IRS by the April 15 deadline. When they send in that tax payment, it means they have less money to spend on basic items like groceries, gas, medicine and clothing.

The chart above shows how Americans change their spending when they have to pay taxes. Big-box stores (think Walmart and Target) and groceries get hit hard. In terms of total portion of budget dollars, these categories see the biggest drop.

The information comes from data intelligence firm Cardlytics. It tracked 44 subgroups (referred to as “merchant families”) across six broad categories: beauty and health, entertainment and amusement, gas and convenience, restaurant, retail, and travel. The share of spending dropped in all six categories — and all 44 merchant families.

Cardlytics’s partners include Bank of America and PNC. The company has transaction data from more than 100 million U.S. bank accounts, allowing it to deliver accurate information to retailers about customer behavior. It does not share individual personal data.

Child care and medicine drop – but not golf

While the two largest merchant families (general stores and groceries) saw the biggest drops in budget share, some of the smaller merchant families saw much larger drops on a relative percentage basis.

For example, child/infant care went from 0.58 percent of spending down to 0.19 percent. It’s minor in terms of total dollars overall, but within the merchant family itself it’s a huge drop of 67 percent. It’s bigger than the 44 percent relative drop in grocery spending, 43 percent drop at general stores and 40 percent drop on gas.

Similarly, medical services saw a relative drop of 58 percent, even though it’s a tiny merchant family, less than 0.10 percent of total spending. Spending on pets saw a 45 percent drop, the same as auto services.

On the other hand, there’s golf. It was resilient despite taxes getting in the way.

The budget share of golf dropped very slightly (from 0.14 to 0.11 percent in overall share). While the public is spending relatively less on food, medicine and childcare to pay their taxes, they are not cutting back on golf. In fact, the total amount of money spent on golf went up. The trend likely has to due with seasonality and people wanting to play as the weather improves, regardless of taxes.

It’s the one form of entertainment that didn’t see its share of spending tank. The biggest losers were concerts/theater (84 percent), amusement parks (64 percent), sporting events (59 percent), museums/parks (58 percent) and cruises (57 percent).

As winter moves to spring, people’s spending patterns change in accordance. So it’s not only taxes playing a role, but it certainly doesn’t help.

“Retailers in those categories that historically lose the most share during tax season — entertainment, restaurant and grocery — should consider offers to bring consumers back in the doors,” said Dani Cushion, chief marketing officer of Cardlytics. “For example, buy-one-get-one movie tickets or a percentage grocery discount for consumers who present their completed return.”

For this study, Cardlytics looked at customers who both visited a tax preparation service and paid additional taxes in the years 2013-2015. This group totaled more than three million people. Cardlytics compared how these customers spent money in the four weeks before and the four weeks after visiting the accountant, to see how their spending would change once they learned how much tax they would have to pay.

Drop in spending by merchant family

Category
Percentage change in share
Concerts/theater -84%
Child/infant care -67%
Amusement parks -64%
Medical services -63%
Sports and sport venues -59%
Museums/parks -58%
Cruise lines -57%
Personal transportation -53%
Gaming -51%
Office supplies -50%
Books/magazines -50%
Pets -45%
Cinema/video -45%
Auto services and parts -45%
Full-service restaurants -45%
Ticket providers -44%
Car rental -44%
Grocery -44%
Salon/spa -44%
Fast food/quick serve -44%
Sporting and outdoor goods -44%
General/multi-line -43%
Convenience -43%
Drug store/pharmacy -43%
Quick serve and light fare -42%
Beauty products/cosmetics -42%
E-commerce -41%
Other -41%
Gyms/fitness -41%
Gas stations -40%
Misc. recreation services -39%
Bars/night clubs/taverns -39%
Shoes and athletic footwear -38%
Parking services -38%
Apparel -37%
Airlines -37%
Home and garden -37%
Other -33%
Hotels and lodging -30%
Travel and travel agencies -23%
Accessories -23%
Golf -22%
Specialty gifts -10%
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