Rebate checks already spent

Margaret Murray is ready to shop at the drop of a tax rebate check.

The retired registered nurse from Las Vegas said she's taking her government-refunded money to the garment district of Los Angeles.

"That's the purpose of it ... spending," Murray said Monday as the first direct deposits from the Internal Revenue Service landed in bank accounts. "We don't have any bills, so that's good. My husband gave me a credit card when he married me 30 years ago and said, 'If you don't pay it off at the end of the month, you give up the card.'"

Tax rebates have begun dropping into bank accounts, but in this economy, gasoline and groceries may trump a plasma TV, fancy dress or new sofa, making the checks less of an economic jump-start than government officials had hoped.

Shoppers already were using the cash to catch up on basics such as milk and other groceries. Analysts say the rest will probably be used to pay down debt.

Tony and Gerri Roberto, a Guam couple who spent $600 Monday shopping at Wal-Mart in Las Vegas, said they'll definitely pay down credit cards and put some of the rebate toward college tuition for one of their five children.

"Maybe we'll do one thing and take the kids to dinner," Gerri Roberto said.

She said Guam is affected by the U.S. economy to some extent and prices are higher for durable goods such as the camera-recorder they bought at Wal-Mart.

"Our gas prices are up to $4-something a gallon," 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 go out on 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.

In Nevada, 1.1 million households will receive a rebate averaging $910 per family, according to Rep. Shelley Berkley, D-Nev.

The government is injecting $1 billion into the state through the economic stimulus measure.

"It's nothing, just a drop in the mud," said Rita Harris, who was visiting her son in Las Vegas from Georgia. "Most of it's going to go in the gas tank."

Harris said she's living below the poverty level on her Social Security check and will probably try to catch up on bills.

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 like T.J. Maxx to benefit from the stimulus checks.

It appears that most consumers as well as businesses are tightening their belts after a five-year spending spree, said John Restrepo of Las Vegas-based Restrepo Consulting Group.

"While we all hope that most Las Vegas consumers will spend their rebates on purchases to boost the local economy, it is our opinion that the high levels of debt that most consumers have, along with lagging consumer confidence ... will cause many households to pay down debt rather than continue spending," he said.

By comparison, 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 go out as the IRS finishes sending out its regular annual tax refund checks.

In an Associated Press-AOL Money & Finance poll earlier this month, 35 percent said they would use their regular tax refunds for bills and credit card payments. That was up from 27 percent who said that a year ago.

"I was unemployed for about three months recently and I have to use my tax rebate for my past due bills that accumulated during that time," Bethany Gealy responded to a Review-Journal online poll. "If there is anything left, I will buy some stuff for the house and maybe go out to dinner. Also, maybe buy some clothes."

Another reader said he's going to California for a vacation "to help forget about the high gas and grocery prices."

With consumer spending screeching to a halt in recent months, the retail industry needs shoppers to splurge. That's a big challenge. Gasoline could reach $4 a gallon this summer, and a gallon of milk is now about $4 on average as well.

Retailers already have tried to grab a share of the billions of dollars flowing to households.

Sears Holdings Corp. is offering discounts and freebies to shoppers who convert rebate checks into gift cards.

An appliance salesman at a Sears store in Las Vegas said 10 percent of the check amount will be added to the gift card's value.

Home Depot Inc. launched a campaign urging people to spend on eco-friendly products like energy-saving light bulbs.

Rebate checks offer consumers the opportunity to increase their spending power in a challenging economy, said Kathy Grannis, spokeswoman for the National Retail Federation.

"We've already seen a few retailers step up and offer specific promotions for those consumers receiving checks and we're sure to see more follow suit," Grannis told the Review-Journal. "High food and gas prices are still weighing heavy on many consumers' minds and hopefully these checks give them a little bit of confidence when it comes to spending on what they need."

Kroger Co. has already 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 said in Sharonville, Ohio, said Monday. "The interest in it really has been overwhelming."

Joyce Gundling, who was loading groceries at another suburban Cincinnati grocery, said she would take advantage.

"The way groceries are skyrocketing, I'll probably end up spending here anyway," she said. "This way, I get more for my money."

Stephens Washington Bureau Chief Steve Tetreault contributed to this report. The Associated Press contributed to this report.