Spending tax rebate checks

Some skeptical, but Americans making plans for refund from Uncle Sam

Posted: Wednesday, July 18, 2001

WASHINGTON -- Back-to-school books are competing with blackjack tables. Credit-card debts are crying out, too, as Americans decide what to do with their income tax rebates.

A few skeptics still won't believe the refund checks -- up to $300 for singles, $500 for heads of households and $600 for couples -- will really be in the mail starting Friday. But for many Americans, the money already is spoken for -- many times over.

Miami contractor Ivan Delgado wants to buy some new tools before his wife snaps up the rebate for perfume and shoes. Patty Majeski, a T-shirt vendor from Marshfield, Mass., will buy books for her 16-year-old daughter, who attends private school. Ellen Gamel, a school worker from Anchorage, will put the money toward diesel fuel for her mobile home.

Mike McRae, a maintenance worker in Salt Lake City, wants to put a dent in his student loans and credit card debt but says his $500 check won't come close to wiping the slate clean.

''It's like spitting on the dragon's foot,'' he says, hastening to add: ''I'll take whatever I can get.''

Throwing such practicality to the wind, Jim O'Malley, a retiree from St. Paul, Minn., is dreaming of the blackjack tables in Las Vegas.

''It gets nice out there in November,'' he says wistfully.

Another free spirit, Miami cosmetics manufacturer Lorenzo Kessup, is leaving his options open:

''I'll put it in my pocket and see how long it will take for it to leave.''

Some 92 million tax-rebate checks worth a collective $38 billion will be mailed over the next 10 weeks.

This week, the IRS is mailing out notices telling people how much to expect and when. Because of a faulty computer program, about 523,000 of the notices sent out so far told taxpayers they will get the maximum amount possible when their checks may be for much less. The agency is working to put out corrected notices.

For some Americans, President Bush's tax cut represents a chance to reprise their ''bah humbug'' from the postelection weeks.

''It wouldn't help me. It's not enough,'' says William Turner, a Detroit cab driver who expects to put his $300 in the bank or donate it, perhaps to the NAACP. ''I despise Bush.''

''I'm saving up to become a Republican,'' says Kyle Pesonen, a technology appraiser in San Francisco. As for his $300 check, ''It doesn't do you any good.''

Until the money shows up in their mailboxes, there's no convincing some people it ever will.

''I'll believe it when I see it,'' said Earl Powell, a Detroit retiree.

''I'm still skeptical,'' said Jay Harper, a transit supervisor from Pleasant Grove, Utah. ''They've been talking a tax break for how long?''

Polls show that most Americans plan to use their checks to pay down debts and build up savings rather than make new purchases. An NBC-Wall Street Journal poll taken late last month, for example, found 40 percent planned to pay off bills, 29 percent planned to save the money, 14 percent expected to spend it and 10 percent something else.

Analyst Carroll Doherty of the Pew Research Center said the numbers reflect the economic caution that Americans are feeling, particularly their worries about mounting debt.

''People in the low- to middle-income range are feeling really strapped by credit card bills,'' said Doherty.

Count Carter Hess, a copier repairman from Southgate, Mich., among them. He said his $300 check should take ''just a little bit'' off his credit card balances.

''I wish they'd do this every year,'' he said.

There's no shortage of advice for those who are undecided on how to spend their checks: Charities, retailers, investment companies all are ready to help soak up the cash.

Donating to charity sounds good to Kenneth Tyler, who works at the State Department in Washington. But he's decided his own check will have to go to buy clothes and school supplies for his 10-year-old daughter.

''Have you ever bought school clothes for a child?'' he asked. ''I could spend $300 on a couple outfits.''

Chris Winter, a 28-year-old Washington lawyer who describes himself as overpaid and underworked, has more wiggle room in his bank account and wants to do something lasting with his $300. He's e-mailed lawyers all over town urging them to donate their checks to the local Habitat for Humanity chapter, hoping to round up enough pledges to build an $85,000 townhouse.

He says he has commitments from 20 associates at just his own firm.

''We can build somebody a house instead of blowing it in Atlantic City,'' he says.

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