-- 68% To Use Windfall Cash To Invest, Save, or Pay Down Debt --
New York, NY April 7, 1999 57% of Americans expect a refund on their federal tax returns this year, and 42% of those respondents expect to receive a refund of over $1000, says the 1999 Alliance Capital/Harris Tax Poll. Of those expecting refunds, 68% plan to use the money to invest, save, or pay down debt, compared to 72% one year ago. Only 16% expect to spend their tax refund on a new purchase this year, compared to 13% in 1998.
A majority of those aged 18-49 expect refunds in 1999, a finding that is consistent with 1998 results. In contrast, expectations for refunds fell markedly in the 50-64 age category this year, from 49% in 1998 to 40% in 1999.
A surprising 23% of those expecting refunds think their refund will be over $2000, particularly in the age 30-49 category, where 30% expect refunds of this size. In fact, 54% of anticipated refundees aged 30-49 expect over $1000 to be returned to them. In every other major age category, refundees are mostly likely to anticipate a refund of under $500 most notably in the 65+ category, where 58% of anticipated refundees expect refunds under $500.
"Everyone likes to receive windfall cash, but remember excess withholding on your paycheck is basically a interest-free loan to the government," said Robert Errico, President of Alliance Fund
Distributors, the mutual funds division of Alliance Capital Management L.P. "If you are consistently receiving large refunds on your taxes, speak to an accountant about how to optimize your withholding."A solid majority of Americans expecting refunds in 1999 intend to use them to improve their financial circumstances rather than spending the windfall cash on new purchases. 68% plan to use the money to invest, save, or pay down debt. Only 16% plan to buy something with the cash.
The study also found that Americans who expect to owe taxes have planned ahead for the shortfall, with 37% of respondents who expect to owe anticipating that they will pay the taxes from savings (up slightly from 34% in 1998). Only 2% expect to need to pay their excess taxes through the sale of investments.
Regarding the use of municipal bonds and municipal bond funds, the poll found that only 19% of Americans invest in these tax-advantaged securities. These investments seem to be discovered by investors after the age of 30, as use of them is found among only 7% of the 18-29 age category but over 20% of those age 30 and above.
"We urge every investor to speak to their financial advisor about whether municipal bond funds can be a useful addition to their portfolio," said Mr. Errico. "The tax advantages of these securities can be considerable, especially for investors in higher tax brackets."
In other findings, the poll discovered that a majority of investors 58% -- take tax implications into consideration when buying and selling investments.
These findings are the latest from Alliance Capitals Financial Preparedness Study -- an ongoing series of national polls that spotlight issues of savings and investment that affect individuals abilities to plan for and fund their life goals. This most recent poll was conducted by leading research firm Louis Harris & Associates, Inc. in March 1999, surveying a national cross-section of 1008 adults.
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(Detailed statistics on these findings are available on request)
Methodology:
This Harris Poll was conducted by telephone within the United States between March 19 and 23, 1999, among a nationwide cross-section of 1008 adults. Figures for age, sex, race, education, and number of adults in household were weighted where necessary to bring them in line with their actual proportions in the population. In theory, with a sample of this size, one can say with 95% certainty that the results have a statistical precision of plus or minus 3% of what they would be if the entire adult population had been polled with complete accuracy. Unfortunately, there are several other possible sources of error in all polls or surveys that are probably more serious than theoretical calculations of sampling error. They include refusals to be interviewed (non-response), question wording and question order, interviewer bias, weighting by demographic control data, and screening (e.g., for likely voters). It is difficult or impossible to quantify the errors that may result from these factors. These statements conform to the principles of disclosure of the National Council on Public Polls.Alliance Fund Distributors, Inc., the principal underwriter of the Alliance Mutual Funds and an affiliate of Alliance Capital Management L.P., the Funds investment advisor, is a member of the NASD.