Consumers Using Tax Rebates for Bills, Savings

The first batch of U.S. taxpayers has already started to receive their federal tax rebates as part of the economic stimulus package, but very few consumers interviewed by Reuters in the past week said they plan to spend them on anything other than necessities.

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Chief among those necessities is fuel, as record-high oil prices have translated into pain at the pump.

"You see that? That's where my check is going," said Amanda Burger, 46, pointing to the price of regular gasoline -- $3.55 a gallon -- at the Phillips 66 gas station in Gibson City, a town of under 4,000 people in rural Illinois.

Burger lives near here but makes an 80-mile daily round trip to her job in Champaign. She estimates that between her job and ferrying her children to and from school, her monthly gasoline bill right now is close to $600.

"Don't think I'm ungrateful, extra money is good," she said. "But a $600 rebate won't stimulate my economy much."

According to a recent survey, some 70 percent of people said they planned to save their rebate or use it to pay down debt.

But people like Morgan Lawson, 58, who works at the Time-Life Building in Manhattan supervising newspaper deliveries said higher food and energy prices would wipe out their rebate.

"The likelihood of saving it is slim," Lawson said.

That's not to say everyone has an outlook as gloomy as Burger's or Lawson's.

Consumers like Cindy Shea, 45, a single mother from Edmond, Oklahoma, say they have big plans for their rebates.

"I'm excited about my rebate check," Shea said. "It will make a huge difference. I'll be using the money for home improvements."

Or Sergio Rivas, a computer network administrator from Hialeah, Florida, who said he would put his rebate toward a deposit on a new apartment. Rivas is looking for "something a little bit bigger, hopefully with some kind of patio."

U.S. President Bush signed into law a $152 billion fiscal stimulus package earlier this year, which will provide tax rebates to 130 million Americans, with the size of most payments about $600 for an individual and $1,200 for a couple. Households will receive a total of around $107 billion.

Bush has touted the rebates as a way to boost the ailing U.S. economy, and retailers look at the rebate checks as a way to lift sluggish sales.

Cautious Consumers  

But the Americans due to receive full rebates -- individuals with taxable incomes less than $75,000 and couples under $150,000 -- are the consumers hardest hit by rising food and fuel prices, the housing sector meltdown, the credit crunch and an uncertain job market.

That includes consumers like Ava Lee, 34, who has been out of work in Los Angeles since December. She says she'll use her rebate to pay for "necessary expenses" like food and gas.

"I'd use mine for everyday spending," said Lee, who has turned off her heat and air conditioning to cut expenses. "I would not go out and say, 'Ooh! I have extra money."'

"We're in such uncertain times economically," she added.

According to a Reuters/University of Michigan survey released last Friday, 70 percent of consumers polled plan to take a "precautionary" approach to their rebate. Among those surveyed, 25 percent favored using the money to rebuild savings, while 45 percent planned to repay debt.

Consumers like Lia Hasson, 39, a free-lance pianist and mother of 2-year-old twin boys in Cincinnati, say that given the uncertainty surrounding the U.S. economy, saving was the only option.

"I'm probably just putting it in a savings account -- holding onto it for the summer," Hasson said.

"Lean living for lean times." While down in Houston, public library worker Sarah Ortiz said she had decided early on she would use the money to pay down debt.

"I'm trying to get down to one credit card," she said.

"They say we're in a credit crunch." Only about 30 percent of consumers polled in the Reuters/University of Michigan survey said they plan to spend the tax rebate in 2008.

Liz Collins of Katy, Texas, who sells purses and jewelry in downtown Houston, said she planned to travel to New Jersey to see her sister renew her wedding vows.

"I haven't seen her in eight years," she said. "This (rebate) really will allow me to go."

While relatively few consumers seem to feel as confident as Collins when it comes to spending their rebate checks, a larger portion said they were cautious about spending the money because of the unsteady state of the U.S. economy.

"I think the economy is going to tank," said Mark LeGrand, 45, a free-lance production assistant in Los Angeles, who plans to save his rebate check. "I feel the message we're getting is things are OK, and there's no way it can be."

"People have purchased so much on credit," he added. "We're living in a house of cards."

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