The state Consumer Protection Board is cautioning consumers receiving tax rebate checks not to fall prey to the retail industry’s “enticing gimmicks,” while members of the Retail Council of New York are praying that consumers will just spend, spend, spend.
“I think this issue [of how to spend the rebates] goes back to the old saying ‘where you stand, depends on where you sit,’” Retail Council Executive Vice President Ted Potrikus said. “What retailers are hoping for is that people will spend the money and keep the economy moving. That’s what it was intended for.”
The rebate checks, which can range up to $600 for individuals and $1,200 for married couples plus another $300 per child for eligible parents, are expected to reach 130 million households. The IRS has set the goal of making 6.6 million direct deposits to taxpayers bank accounts by the end of this week.
Potrikus said retailers know they are competing with increased fuel prices and food costs. He said many businesses will attempt to package special sales to coincide with the rebates similar to what was done during the “sales tax holidays’ during former Gov. George Pataki’s administration.
“Any good merchant is going to let customers know they have products for sale at prices people can afford right now,” he said.
Consumer confidence in upstate New York state slid below the national rate last month, according to the latest monthly survey by the Siena Research Institute. In March upstate consumer confidence statewide slipped by 7.2 points to 53.1. Meanwhile, the overall national score measured by the University of Michigan only dropped 1.3 points in March, to 69.5.
Kajal Lahiri, a professor of economics at UAlbany, said tax rebates over the course of American history have varied in their stimulative impact on the economy. He said he thinks this latest rebate will trend toward a highly positive impact because of all of the high costs faced by consumers in today’s economy.
“The feds want people to spend that money. You can imagine that people without a lot of money will spend the rebates on day-to-day purchases,” he said. “Different consumers have different needs and I think people will address their most pressing concerns first.”
An Associated Press-AOL Money & Finance poll conducted earlier this month seemed to indicate consumers are more inclined to use tax refunds to pay bills and credit card debt. According to the poll 35 percent of respondents said they would use the money to pay down debt, up from 27 percent who said that a year ago.
Mindy Bockstein, chairwoman and executive director of the New York state Consumer Protection Board, is hoping consumers don’t spend the rebates all in one place.
“We are urging consumers to think twice before spending what is really an unexpected windfall, as this money can help defray their costs of living over the long term,” Bockstein said.
The Consumer Protection Board is advising people to use the rebate money to pay down high interest credit card debt and then consider the purchase of items that will lower long-term expenses. The board recommends consumers consider energy-efficient appliances and light bulbs to reduce utility costs and bulk purchases of household items with long shelf lives — like laundry detergent and toiletries.
The board also suggests consumers consider using the rebate to reduce principal on a home mortgage, pay school tuition or to prepay for heating fuels. Sometimes making an annual payment for services or membership fees can save consumers money because of discounts offered for an annual fee instead of a monthly charge.
However, should consumers elect to “turn their entire check over to a retail establishment” offering an incentive like a gift card, Consumer Protection Board officials want consumers to remember that New York state law requires companies to disclose all gift card terms and conditions at the point-of-purchase, be it at the store or through the mail.
Lahiri said it doesn’t really matter how people choose to spend their rebates because the money will stimulate the economy regardless.
“Even if the money is used to pay off loans it is helpful, because then the banks have the money and they can loan the money out to people, so either way it’s an infusion of money into the economy,” he said.
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