The first tax rebates began landing in taxpayers' bank accounts ahead of schedule yesterday, kicking off a $168 billion stimulus program to put cash in consumers' pockets and jolt the stalling economy.
Sales-hungry retailers are jostling to capture a share, launching promotions to entice Americans to spend the money in their stores rather than using it to pay bills or stashing it away.
Home Depot is promoting energy-efficient lights and appliances. Sears is kicking in an additional 10 percent for shoppers who put the entire amount into gift cards. Local furniture retailer Gardiner's is offering discounts to its credit card holders. Circuit City will accept refund checks as a form of payment and put any leftover money on a gift card.
The world's largest retailer, Wal-Mart Stores Inc., was caught off guard by the earlier-than-expected payments. It planned to reveal details of its promotions today.
The Internal Revenue Service sped up its timetable for the rebates by switching to a computer system that can process payments daily, enabling it to make deposits in the accounts of 800,000 taxpayers yesterday, today and tomorrow. The IRS will take Thursday off to rev up for 5 million deposits Friday.
Paper checks will begin going out May 9, a week earlier than expected.
More than 130 million households will get the payments, the IRS said. It also announced that eligible taxpayers who normally don't fill out a tax return and don't owe the government money will get an extra six months - until Oct. 15 - to file so they can get the payments.
The amounts are hefty enough to make retailers salivate: $600 per person - $1,200 for married couples - and for parents, an extra $300 per child.
"Clearly, retailers have been challenged since the holiday season," said Scott Krugman, a vice president at the National Retail Federation, which expects rebates to add $43 billion to the economy. "Consumers have been hibernating. Retailers see the rebate checks as an opportunity to wake them up and get them into their stores."
But some economists think debt-strapped consumers won't spend the bulk of the windfall on new purchases, instead choosing to save it or pay down debt.
"I think it will be a very small blip on the radar screen for retailers," said Britt Beemer, owner of consumer research firm America's Research Group. He said consumers will spend 70 percent of their rebates to pay bills. "Consumers are so heavily covered in debt ... they have to get their credit card bills under control."
