Rebate or Bonus?
It all depends on how you use it
2008-05-01
By Donna Johnson & Boyd Klingler

Usually, when you hear, “The check’s in the mail,” that means it probably isn’t. But in the case of the tax rebates churning out from the Treasury starting in early May, this time it’s true.

Completely uncharacteristic for Uncle Sam, the checks are actually a week ahead of schedule and, depending on when you filed, the rebate deliveries will run through the end of the summer.

Considering the current conditions of the consumer economy including runaway fuel costs, soaring food prices and recurring mortgage woes, some analysts say that this $160 billion infusion will produce little of the desired effect to stimulate economic growth. Others insist that you can’t throw that much money—albeit at a $12 trillion economy--and not have some of it stick.

The question then becomes, what’s the best way to utilize the rebates and best for whom?
If we use them to purchase domestic versus foreign products, it will have the macro effect of sustaining employment, improving profits, and spurring production which is good for the economy overall.

Using the money to pay down high-interest debt (often incurred by purchasing domestic or foreign products), contribute to an IRA, or improve your acid rainy day fund, won’t kick-start a sluggish economy. The individual effect, however, will leave consumers on a somewhat firmer financial footing in the long run.

As much as you’d like to imagine that $600 as a free computer or unexpected vacation if you’re a household receiving $1200, you might also want to think of it as a couple of monthly car notes or credit card bills that you could get in front of for a change.

And while you’re dreaming, keep in mind that this is a rebate and not a bonus. It’s like finding $20 that was spun out of your jeans in the washing machine, not like finding $20 on the street.

You all know what you’re going to do with the $600, so you don’t need our 2 cents. But we wouldn’t be Giving You the Business if we didn’t leave you with a few of our own suggestions.

May—Since the first of the checks will be coming out right before Mother’s Day, use part of it to take your mother or the mother of your children to a relaxing Sunday brunch, complete with flowers and a gift. Use the rest of the money on gas for getting back and forth from the mall, the florist and the restaurant.

June—It’s graduation time. Use part of the money to buy your proud graduate a gift for a job well done. Use the rest of the money on gas for getting back and forth to the commencement ceremony.

June—It’s also the month to thank dad for all of his hard work Use part of the money to celebrate your father or the father of your children. Use the rest of the money on gas for getting back and forth to the celebration.

July—Every few years most of us are invited to at least one summer wedding. If that’s just your luck this year, use part of the money to buy an impressive gift for the happy couple. Use the rest of the money on gas for getting back and forth between the church and the reception hall.

August—Now it’s time for back to school or off to the university. Use part of the money on clothing, electronics and school supplies. By then you probably won’t have any of the rebate left, but if you do, use it on gas for backing the U-Haul out of the driveway.

The rebate debate is the tree falling in the forest. The rebates themselves will have an effect—what kind and how much depends on what 130 million Americans chose to do with them.

Donna Johnson and Boyd Klingler are Giving You the BusinessSM, in an occasional column for EbonyJet.com. Send your business and finance-related questions to our e-mailbag.