- The Washington Times - Tuesday, April 14, 2009

Most people say they plan to use this year's tax refund to pay bills, deciding in this sour economy to be more frugal with their annual windfall.

Fifty-four percent of those receiving refunds said they intend to pay off credit card, utility, housing and other bills, according to an Associated Press-GfK poll released Monday. That compares with 35 percent who said the same thing a year ago.

Only 5 percent, about the same as a year ago, said they planned to go on a shopping spree.

The survey found that 38 percent of those receiving a refund said they plan to spend at least part of it. But the spending appears to be mostly on basic needs: 17 percent said they would use the money for everyday needs such as food and clothing. It was 7 percent a year ago.

Phillip Barks of Aberdeen, Md., said he and his wife, Kristy, have spent their $3,800 refund. Most went toward a credit card bill.

“We didn't pay that off, though,” said Phillip Barks, 31, who serves in the Army. “We just put a big dent in it.”

The deadline for individuals to file their 2008 tax returns is Wednesday. As of last week, the Internal Revenue Service had sent out about $200 billion in tax refunds. Commissioner Doug Shulman said the agency expects to send out about $330 billion by the end of tax season.

The AP-GfK poll found that 57 percent of adults said they expect to receive a tax refund. The average refund this year is about $2,700, compared with $2,500 last year, Mr. Shulman said.

The Obama administration is hoping this year's refunds will help boost an economy that has shed more than 5 million jobs since December 2007. Congress passed a $787 billion economic recovery bill in February. The package was a mixture of government spending and tax cuts designed to get people to spend at a time when most are cutting back and saving more. It makes sense to be frugal when the economy is in such bad shape, but it hurts the economy when everyone does it.

The poll found that 35 percent of those receiving refunds plan to save or invest at least part of the money, a slight increase from a year ago. About 37 percent said they planned to use their refunds to pay down debt, including credit cards, student loans and personal loans. A year ago, 24 percent said they would use at least part of their refunds to pay down debt.

Only 3 percent of those receiving refunds said they planned to invest at least part of the money in real estate, which has been depressed in markets across the country.

The poll found that those making less than $50,000 a year were much more likely to use their tax refunds to pay bills or buy everyday items than those making more. People making more than $100,000 a year were more likely to use their refunds to go on a vacation than those making less.

Among the other findings in the poll:

c 31 percent of those receiving refunds said they will use at least part of the money to pay credit card bills, compared with 17 percent a year ago.

c 19 percent said they will use their refunds to pay utility bills, compared with 10 percent a year ago.

c 17 percent said they will use their refunds for rent or mortgage payments, compared with 7 percent a year ago.

c 11 percent of those receiving refunds said they would use them to go on a vacation, a slight increase from a year ago.

The AP-GfK poll was conducted April 3-7 and involved landline and cell phone interviews with 1,002 randomly chosen adults. The margin of error is 3.1 percentage points. The margin of error is 4.3 percentage points for those who have already received or expect to receive a tax refund from their 2008 taxes.

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