- The Washington Times - Tuesday, April 29, 2008

NEW YORK (AP) — As the first tax rebates from the Internal Revenue Service landed in bank accounts yesterday, shoppers were already using the cash to play catch-up on basics such as milk and other groceries.

Analysts say the rest will probably be used to pay down debt.

Alicia Flaxman, a stay-at-home mother from Seekonk, Mass., was shopping at a Target store yesterday and said she would use some of the rebate for food — cheaper items such as potatoes, not the more expensive meat and fish.

“My bills are double,” she said. “I go to the supermarket and I spend $200. I used to spend $120.”

The rest of the money will probably go for summer clothes for her three children, she said.

The IRS aims to make 800,000 payments every day for the first three days of this week. No deposits will be made Thursday, and about 5 million will be made Friday.

How you receive the rebate depends on how you filed your taxes. Paper checks will go out beginning May 9. The exact timing for both direct deposit and paper checks depends on the last two digits of your Social Security number.

The rebates, which are expected to reach 130 million households, range up to $600 for individuals and $1,200 for married couples, plus $300 per child for eligible parents.

Eric Mossack of Spring Hill, Tenn., had his $1,200 rebate in his checking account yesterday and spent some of it on clothing from Gap, Kohl’s and other stores — his first shopping spree in a few months, he said. The rest will go to car payments.

“We paid off something we owed, and had a little extra to spend,” said Mr. Mossack.

But Bethany Blankley of Manhattan, who works in public relations, said she would immediately put the $600 she received yesterday toward paying off credit cards. “The interest rates are high,” she said.

That kind of frugality doesn’t surprise analysts, who say shoppers are earmarking more of their money for groceries, the utility bill or credit-card payments. Besides grocery chains, they expect discount retailers such as Wal-Mart Stores Inc. and off-price clothing outlets, including T.J. Maxx, to benefit from the stimulus checks.

“Consumers are so feeling the pinch that … they are really being forced to step away from luxury or discretionary purchases,” said Janet Hoffman, managing partner of the North American retail division of Accenture.

Previous government stimulus plans led to a lift across the entire retail industry, said Stacy Janiak, vice chairman and U.S. retail leader at Deloitte Research.

The rebates are distributed as the IRS finishes sending out its regular, annual tax-refund checks.

Retailers already have tried to grab a share of the billions of dollars flowing to households. Sears Holdings Corp. is offering discounts and free items to shoppers who convert rebate checks into gift cards. Kroger Co. announced that shoppers can convert $300 rebate checks into a $330 Kroger gift card.

“I’d estimate that we had about 100 people indicate they were ready to get the cards as soon as they could,” Brad Casebolt, the manager of a Kroger in Sharonville, Ohio, said yesterday. “The interest in it really has been overwhelming.”

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