TO SPEND OR NOT TO SPEND: AN INVESTIGATION OF CONSUMER BEHAVIORS RELATED TO TAX REFUNDS

Morgan Daly, Mary Jane Lenard and Lisa Monahan

Accounting & Taxation, 2022, vol. 14, issue 1, 1-14

Abstract: This research is focused on exploring consumer behavior in relation to federal tax refunds. We constructed a survey questionnaire to examine the choices made by consumers; the patterns focused on spending vs. saving behaviors, types of purchases (luxury vs. necessity), and taxpayer confidence levels in tax preparation. The objective of the research is to determine the characteristics of consumers who spend (save) their tax refund, as well as gauge levels of inherent consumer responsibility. We recruited participants via MTurk (Amazon Mechanical Turk) in which participants self-select and complete the survey for compensation. This research used a scenario-based approach for data collection, in which we instructed consumers to respond as if they had received a $3,000 refund. Results indicate that consumers who describe themselves as tightwads save more of their refund and consider their use of the refund as more responsible than consumers who describe themselves as spendthrifts. Tightwads also perceive that they have more knowledge of tax rules and are less confused about tax reporting than spendthrifts. Our paper contributes to the literature on tax policy by providing insight into the consumer perspective on tax rules and response to tax refunds.

Keywords: Tax Refunds; Tax Policy; Saving; Consumer Behavior (search for similar items in EconPapers)
JEL-codes: G51 H24 M30 Z18 (search for similar items in EconPapers)
Date: 2022
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