Many Americans adjust spending plans to cope with payroll tax hike

As a result of the fiscal cliff agreement at the beginning of the year, American consumers saw payroll taxes rise. 

For the past two years, Social Security tax had been 4.2 percent, but as of January 1, 2013, it was back up to 6.2 percent on the first $113,700 in wages. 

In response, the National Retail Federation found many Americans are adjusting their spending plans, which could have an impact on small- to medium-sized retailers. 

If consumers aren't spending as much as they were before, retailers could see cash flow slow, which might make it difficult for them to obtain a loan from a bank. However, inventory financing could provide them with a revolving line of credit to keep their shelves stocked if they are told "No" by a bank. 

According to NRF's 2013 Tax Returns Survey, 73.3 percent of consumers said their spending plans are taking a hit as a result of the payroll tax hike. The majority of respondents said their spending plans have been either somewhat or greatly impacted, and just under half said they will spend less overall. 

"We cannot grow the nation's economy until consumers consume," said Matthew Shay, president and CEO of NRF. "A smaller paycheck due to the fiscal cliff deal, higher gas prices, low consumer confidence and ongoing uncertainty about our nation's fiscal health is negatively impacting consumers and businesses across the country."

To get through these difficult times, small- to medium-sized retailers could take advantage of inventory financing. When denied by a bank, this type of asset-based lending allows retailers to use their current inventory as collateral to obtain a revolving line of credit, which can help them keep their shelves stocked and push through times when cash flow may be sluggish.