Rebates Coming: Spend or Save?

April 27, 2008— -- If all goes according to the economics textbook, tax rebates will hit millions of Americans' bank accounts, they'll turn around and spend, spend, spend -- stimulating economic growth and confidence in the flagging economy.

To find out more about the stimulus package CLICK HERE, and to learn when you should be getting your rebate, CLICK HERE.

More than 130 million U.S. households are eligible for the checks. Individuals could get up to $600, couples up to $1,200 with an additional $300 per child. In total about $120 billion will be doled out over the next two months.

People with higher incomes won't qualify for the rebates, but for single tax filers if your gross adjusted income is more than $75,000 the check won't be in the mail. Same goes for those who file a joint return with a gross adjusted income of more than $150,000.

Still for plan to work, people must spend the money. An ABC News poll showed that 32 percent of those expecting rebates planned to save or invest it, not spend it.

"If people save it, it's going to have very little effect on the economy," New York University economist John Leahy said.

Spending the money on anything from gas and groceries to flat screen TVs is about the only way to spur broad economic growth. Even if people pay off existing debt with the rebate money Leahy says that could free them up to shop.

If big retailers have their say, every dime of your tax rebate will be spent. Many retailers are offering incentives to trade in rebate checks.

Grocery chains Albertsons and Kroger and department stores Sears and Kmart are offering consumers an extra 10 percent for every $300 gift certificate they buy.

Home Depot is going green, urging customers to stretch their tax rebate dollars by investing in energy-saving products. Some retailers, like Walmart, are even considering a plan to cash tax rebates checks at no charge.

Sony USA reduced the price of one popular high definition TV and then ran a series of ads targeting the tax rebates. Sales went up, just on the expectation that consumers would have more money in their pockets.