Tax rebate checks are central to the $168 billion stimulus package approved by Congress. These checks will start arriving in the mailboxes and bank accounts of persons having incomes below a certain limit, $87,000 for singles and $174,000 for married joint filers, from the first week of May onwards.The entire excercise will last till July, and is intended to prevent the economy from sliding into recession by putting more spending money in the pockets of the consumer.
Public opinion polls suggest that most people do not intend to spend the entire rebate. They plan to use a part of it to pay off credit card debt or to simply save it for a rainy day.Nevertheless it is expected , that on an average, while a third of the rebate may be saved, the balance will be spent.
Although most retailers are yet to announce special promotions, companies like Sears plan to offer a 10% bonus to anyone who converts his check into a Sears or Kmart gift card. Kroger Co., one of the nation's largest grocers is also offering discounts while Home Depot is all set to launch an advertising campaign shortly. Consumer durable companies like Sony Electronics are set to promote their products. Sony in particular is promoting its home theater systems and HD TV's. With such deals being offered by a couple of the nation's largest retailers, it won't be long before others follow suit.
Most analysts appreciate the difficulty that the average consumer is in. They expect the shopping to be need based, and are pretty certain that people will avoid buying luxuries. The money is most likely to be spent on groceries, paying fuel and electricity bills, and for shopping at discount stores, they say.
The timing for sending out the rebate checks could not have been better. The period includes Mother's Day, Father's Day, Fourth of July and the start of the back to school shopping season. As for the impact this spending will have on the economy, economists point out that smaller rebates handed out during the 2001 recession did lead to a spike in sales, but the recovery was shortlived and the impact had worn out by the folowing year. Will things be any different this time? Only time will tell.