Rebate vs. reality check

The government’s economic stimulus program begins today, and William Pearson of Los Angeles is ready to receive his $600 tax rebate -- and hoard it.

“I’m too afraid to spend it,” Pearson, 63, said last week. “No one knows where gas or food is going to go, and I’m uncertain about making it through the summer.”

The Internal Revenue Service will begin sending rebates via electronic direct deposit today and mailing checks starting May 9. President Bush said last week the $110 billion that 130 million households should receive by midsummer would help offset high gasoline and food prices and “give our economy a boost to help us pull out of the economic slowdown.”

Pearson, a bachelor who makes $45,000 a year as a groundskeeper for an office building, said he wasn’t so sure about that. He’ll save rather than spend his $600 rebate, which is what recent public opinion polls found most Americans planned to do.

“For the trouble we’re in, it’s a petty amount,” Pearson said. “If we could see the economy leveling off in the future, we might spend it, but we’re trying to be realists. This money looks like something everyone’s going to have to hold on to.”

Not everyone is eligible. Singles with adjusted gross incomes of more than $87,000 and married joint filers with incomes of more than $174,000 won’t get checks. The closer taxpayers get to these caps, the smaller their rebates will be.

Pasadena electrician Floyd Henderson, 62, believes he makes too much to qualify for a rebate.

“I think it’s unfair -- everyone should be getting it,” he said. And if he were to receive a rebate? “I’m definitely not in a spending mood. I would sit on it, or use it to pay my bills.”

A Los Angeles Times/Bloomberg poll found that 31% of eligible taxpayers were keen to use their rebates to wipe out debt, and that 34% wanted to bolster their savings. Only 18% of respondents said they planned to spend the money.

Booming fuel and food prices and shriveling incomes and home values have pushed consumer confidence to a quarter-century low, according to a survey by Reuters and the University of Michigan. It found that 30% of people would buy things with their rebate checks.

Kwame Addo of Chino Hills is one of those. He and his wife figure they’ll receive $1,200, and he’ll use some of it to visit his sister in London in a few weeks, a trip made affordable by a $460 round-trip ticket.

“The dollar is low compared to the euro, so it’ll come in handy,” said Addo, 41, a vice president at Union Bank of California.

Calling the economic stimulus plan “a nice gesture,” Addo said he might treat himself to some new shirts and shoes in the spirit of helping out the country. But he has an American Express balance to pay off, two children to support and other expenses, though he doesn’t have much debt, unlike some of his friends. He doesn’t figure they’ll be shopping with their rebate money.

“Most people could use extra padding, but I don’t think they’ll use it the way it’s intended,” he said. “The economy’s doing badly, with foreclosures left and right, and we need more action on the big-ticket items.”

The rebate program will pass Jason Lee by, not because he earns too much but because his income is too low. The 26-year-old from Valencia, who manages stuffed animal shop Lenovia Plush in downtown Los Angeles, said he was dismayed when he learned he didn’t qualify.

“The stimulus plan should focus on people who are lower income who don’t make that much,” he said. “I should be the one getting that money. It doesn’t make sense.”

For J.B. Becker, who works with Pearson as a groundskeeper, the economic hard times made it easy for him to decide what to do when his $600 arrives: Half will go to a children’s foundation and half to a senior citizens’ organization.

“I’m OK financially. The amount’s not enough to really help me, but it’ll help them,” said Becker, a 49-year-old from Simi Valley. “With costs rising, they’ll need whatever they can get.”

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