The first IRS rebate checks are officially in the mail, and while the money won't pay for early retirement or a tropical vacation, it is just enough to create a quandary: Spend it or save it?
For those at the bottom, the money is manna from heaven, a godsend that will stretch the groceries or keep a jalopy running another year. For those in the middle, it might pay for school uniforms and band instruments for the kids, or a cushion for our high-voltage electricity bills. At the top, the rebate is the equivalent of a pretty good night out on the town--it might buy great opera tickets or a fantastic sushi dinner.
Starting this week, through September, the IRS is sending checks to some 92 million Americans as part of the $1.3 trillion tax cut pushed through Congress by President Bush. Republican or Democrat, liberal, moderate or conservative, rich, comfortable or struggling--few people (actually nobody) expressed any gratitude to the IRS or to Bush, who fulfills a campaign pledge with the rebates.
At Dolores Mission in Boyle Heights, Julio Mendoza Sr., 58, a janitor, was puzzled by the letter he received from the IRS last Friday. A single father of four, with two children living at home, he was excited at the prospect of $500, the amount designated for heads of households. Instead, he would receive enough money for "two gallons of milk," he said as he studied the letter, "that's all." Mendoza, the letter said, is entitled to only $12.65.
If the government really wanted to help people, he said, it would do something to raise salaries.
His co-worker Hector Gonzalez, 33, an office assistant, agreed. "The government could do much more if it really wanted to help people," he said. "This is just something to keep us quiet, buy our votes. We still earn low wages and pay too much taxes."
As Mendoza found out, the amount of the rebate checks will vary. Taxpayers will receive whichever amount is less: 5% of their taxable income for the year 2000, or $300 for singles; $500 for heads of households and $600 for those who are married and file joint tax returns. Some folks won't be getting a penny--those who were claimed as dependents in 2000, such as students; nonresident immigrants (who may work in the U.S. but aren't permanent residents); those who paid no income tax last year.
"I think the whole thing is radically overblown," said Torin Roher, executive vice president of a New York-based public relations company, with offices in Los Angeles and San Jose. He is not excited by the idea of the rebate, nor the hoopla about the rebate nor the $300 he can expect to receive. "I think the people who really need the money, for the most part, won't get it. I'm sure it'll help some people maybe pay down some debt, but it's not going to make a huge difference.
"As for the idea that this is going to increase consumer spending," Roher said, "I think George Bush is living in his own world of oil fields and trust funds. He doesn't have a grasp on reality."
Although many economists are not convinced that the money will have much of an impact, Bush has made it clear he hopes the tax cut, which will pump $39 billion into the American wallets, will stimulate the economy. (In other words, true Americans have a mandate to go out and shop. The National Retail Federation was such a strong backer of the rebate measure that the group's leaders were invited to Bush's signing ceremony for the tax cut bill.)
Not everyone is ready to participate in the national shopping spree. Santa Monica screenwriter Jonathan Fernandez, 34, has no firm plans to splurge with his $300 and says he rarely drops that much on any one item at a time. "I think I'm a bad consumer," he admits. "I am the problem with the economy."
Whether the populace will heed the patriotic call to shop till it drops remains to be seen; Americans are neck-deep in debt and increasingly worried about job security. As of April, household debt averaged a record $1.05 of debt for every $1 of income and unemployment claims have climbed sharply.
Herb M., a longtime member of Debtors Anonymous, says the group's plan of action is to put one-third of the money into a spending plan, another third toward debt repayment and a third into savings. "You can go hog wild--but just with a third of it," he said. "At D.A. we're mainly going against the current in that we believe people should not [have] debt--no matter what."
Herb has no debt, but as an actor whose income rises and falls, he can use the $300. He'll tithe his usual 10% to charity and split the remainder between saving and spending. "I've had such a low income that for me it will kind of be necessary money."
Those who do not need the money are being urged by editorials, newspaper articles and e-mail messages to consider giving their rebates to charity.
Mark Caggiano, a Massachusetts real estate attorney, has e-mailed Harvard 1989 graduates, urging his classmates to donate their checks to charity. Reactions and responses have varied, Caggiano said, from some agreeing to donate their checks to one who declined, saying his rebate is earmarked for a purchase of pot. "Also, couple of people said they'd send the money to the Democratic National Committee and send a receipt to George Bush," he said. "But my intent was completely apolitical."
Web designer Tony Adams has created a site, http://www.taxrebatepledge.org, that asks people to promise their rebates to any charity. So far people have pledged to give about $250,000 to a variety of organizations, including, for example, the Sierra Club. But Adams' pledge drive has not been an unqualified success. "You're a Communist, you're a socialist, I'm giving my money to the NRA and buying a gun!" was one of many similar messages Adams has received. "I can't tell you how many guns I'm responsible for," Adams sighed.
For many people, $300 to $600 is not just a bonus, but badly needed money.
"It's a lot of money," said Deborah Thompson, an attendant at an Angel View Crippled Children's Foundation home in Joshua Tree. "[It's] more than I make in two weeks, but my son hasn't been to Disneyland in 12 years, so that's what we're going to do first." The rest of the money will go to toward her utility bills.
Luis Tirado, a 33-year-old cook who arrived in the tiny Mojave Desert town of Ludlow from his native Cuba in 1980, will invest his $500 in his highest priority, the college fund of his 11-year-old son, John Michael. "Education is No. 1 with me, so that's where the money will go."
Television producer Sharon Morov of Venice was feeling as though she is the only person in America not wondering what to do with her rebate. That's because Morov will not receive a rebate at all.
"I didn't vote for Bush, and if I have to put up with this ... I want the pittance that comes with it," she fumed. "I figured, well, of course I paid taxes, of course I'm not anybody's dependent." But she figured wrong. The IRS explained quite clearly that, between her income and her deductions, she does not qualify.
"I would have done something fun with it," Morov said, then paused. "I really have no right" to be angry, she said. "I don't think $300 is going to change anybody's life."
Information about the rebates is available on the IRS TeleTax automated hotline, 800-829-4477 .