Poll: Tax Rebate checks paying off debt

CBS MarketWatch ^ | August 20, 2003 | Carolyn Pritchard

[AntiGuv]

SAN FRANCISCO (CBS.MW) - Almost half of Americans who've received tax-rebate checks have used the money to pay off their debt -- not spent it in the mall, according to a recent CBS News/MarketWatch poll.

Thirty percent of those surveyed said they've received their rebate checks and of those, 46 percent said the money went to pay bills. Another 29 percent said they've saved or invested the rebates, while just 18 percent said they spent it.

The results are at odds with the Bush Administration's hope, and possibly that of retailers, for the tax rebate: that Americans would spend the money to help stimulate economic recovery.

The statistics are similar to the results of another poll conducted two years ago, during the first round of tax cuts. In 2001, 43 percent of tax rebate recipients said they used their check to pay bills, 32 percent saved or invested the money and just 15 percent spent it.

Two consumer credit reports released last week dovetail with the poll's findings.

The Cambridge Consumer Credit Index, a monthly survey on credit card use, fell to a reading of 55 in August from 60 in July, indicating that consumers are less willing to take on new debt.

And a report from the Federal Reserve showed a rare decline in consumer credit for the month of June. Total consumer credit, excluding mortgage-backed debt, fell $400 million in June to $1.761 trillion, the Fed said. See full story.

As for the people surveyed in the CBS poll, about 55 percent said they had not yet received their rebate check, and about 13 percent of the respondents said they did not expect to receive one.

Those who did receive it were no more likely than those who didn't to say the recent tax cuts would help create jobs.

But the tendency to pay bills rose as household incomes fell. Of those Americans with annual household incomes totaling less than $50,000, 55 percent said they used their tax rebate to pay bills. By comparison, in households bringing in $50,000 or more, just 34 percent used the funds to pay bills. More of those in the higher-income households reported they either saved the money or invested it.

CBS News conducted the poll among a random sampling of 798 adults across the nation interviewed over the telephone on August 11 and 12. The margin of error is estimated at plus or minus four percentage points.

[fortaydoos]

Anti-Bush garbage. If these middle and lower class use the 400 bucks and up to pay the electric bill, we can be sure that later in the month the month will at least be partially spent on consumer goods. Of course, 99% of the junk they buy will be made in China and not create any American jobs, but suggesting that a tax cut that allows average folks to pay their bills is bad for the economy is silly.

[BlackbirdSST]

Home Depot has been running Ad's for the last several week's trying to get us in to spend that rebate, few taker's I presume! Blackbird.

[smith288]

Since when is Americans fiscally responsible? Now all of a sudden we are smart with out cash?

[Lazamataz]

Almost half of Americans who've received tax-rebate checks have used the money to pay off their debt -- not spent it in the mall,

We're all gonna die!!!!

[smith288]

out = our

[BlackbirdSST]

If these middle and lower class use the 400 bucks and up to pay the electric bill, we can be sure that later in the month the month will at least be partially spent on consumer goods.

I'll buy into what you say here, but what about the month after, and the month after, etc...How far was this paltry rebate supposed to carry the burden? Blackbird.

[AntiGuv]

I'm certainly not suggesting any such thing (don't shoot the messenger! ;) I think reducing average consumer debt loads would prove a great step in the right direction. Won't do much for the short-term economic performace, but has the potential to do wonders over the fiscal stability of the long-term American economy.

[Coop]

I guess the Walmarts and other retailers telling us folks were cashing and spending their checks were just making it all up then. :-)

Personally, we just got our check a week or so ago and stuck it in savings. So CBS would be pleased with our response to the polling question at this moment. But it's already set aside for a vacation in about 8 weeks. Some still-to-be-determined locale's economy will benefit from this check.

[Straight Vermonter]

Lets not forget the rebate was only part of the deal. We did get a tax cut as well. Granted it is small but it is every payday.

[camle]

paying off debt is good for the economy. far better than simply purchasing a product.

When you pay off a debt, say to a bank, the bank gets the cash, right? Well they don't actually need to keep all of that in cash, federal requirements are something like 1% of their "Cash" needs to be in cash. the other 99% can be in other assets, such as accounts receivable.

Accounts receivable is simply other outstanding loans. this means that when debt is paid off, the bank gets more money to loan out again. because they only need to have on hand 1% (or whatever the percentage is today), the other 99 percent goes out to other customers - investments in business new loans.

And since the bank only needs 1% cash on hand, that cash can represent many times it's face value in loans (accounts receivable), in effect creating money.

[kidd]

I spent mine on a new sidewalk. The kids can now safely ride their bikes/trikes without going in the street. The contractors I paid will no doubt spend their wages from the sidewalk repair on a new car or appliance, etc. And so on and so on.

I doesn't take 100% participation to stimulate the local economy.

If people use their money to pay off debt - well then they are simply recovering from the Clinton years - when so little was done with so much.

[not-an-ostrich]

Who recieves refund checks? Only families with children?

[elfman2]

"The results are at odds with the Bush Administration's hope, and possibly that of retailers, for the tax rebate: that Americans would spend the money to help stimulate economic recovery."

The Author's a moron. Of course credit cards are paid off immediately, and then run up again almost as fast. The only failure is of desperate self-serving Democrats trying to talk down the economy.

[elfman2]

"The results are at odds with the Bush Administration's hope, and possibly that of retailers, for the tax rebate: that Americans would spend the money to help stimulate economic recovery."

BTW, it was the Democrats who wanted a larger consumer tax cut, and less for businesses, saying that immediate stimulus was all that was needed. {snicker}

[camle]

if you pay the bank $100 to buy down debt, the bank has $100 in cash. because then only need 1% on hand, they can leverage that $100 into $10,000 in "on-paper" money that they can loan - they cut a check to another customer who deposits that check into their checking account and write their won checks on it.

this is not good???

[Night Hides Not]

Who recieves refund checks? Only families with children?

Without getting too technical, taxpayers with children that had adjustable gross income (the number at the bottom of the first page of the 1040) of between approximately $30,000 to $120,000, and have filed their 2002 tax return, will receive payment of $400 per child.

The $400 represents the difference between the new (accelerated) child tax credit of $1000 per child this year, vs. the $600 that was originally to be paid this year, before Pres. Bush signed the new tax bill.

I know I'm missing a few key points, but it's early, and I don't feel like looking up everything. You can find all of the info at the IRS web page.

[JohnGalt]

Spending does not equal "good for the economy," and Bush was advised wrongly on positioning his nonconsquential tax cut as such.

[Michael121]

A response from Tom Daschle:

"To answer your question, this is not good. I am deeply concerned for my political future and that of my party, we are the working man's party and I am deeply troubled that more and more of the working men are not sending their money to me. Borrowing from a bank is not good for the consumer or the economy. It is only good when the Government does the borrowing or is the borrower. With individual people doing their own business with a bank there are less people who depend on us in the government to do for them and that troubles me deeply."

[mrtysmm]

The point was to get more money into the economy. If they pay a bill with it, that just means they will have more money to spend at the store next month. Either way, it goes into the economy.