More than one-half (54 percent) of individuals working full-time or who are self-employed would use a tax rebate to pay down debt, while 29 percent would save it and 17 percent would spend it.
- WebCPA

The perceived problem seems to be that people are developing a conservative attitude toward their money lately and there is a legitimate fear that people will take their rebate checks Congress gave them to pay off debts and put money in the bank. Surely they must realize that big retailers like Wal-mart and Costco were depending on those rebates going to wasteful spending habits. Apparently, many taxpayers are opting out of the ponzi scheme and using the money to pay down debt.

The worst offenders are parents.

Only 16 percent of households with children said they would spend their rebate, while 59 percent said they planned to use the rebate primarily to pay down debt, and 25 percent will save it.

There are solutions. Congress could pass legislation that repeals rebates to taxpayers that use their rebates to pay off debt. Congress is not above changing the rules after the game, like the 93' retroactive tax increases or 2007's last-minute AMT hubbub.

They can't pass laws to give refunds to people to stimulate a debt driven economy and allow people to use that money to reduce their debt. All that accomplishes is debt reduction for the taxpayer. There's no direct economic shot in the arm for big contributors when that happens. The entire pork/debt driven economy may collapse.

Fear and dread :)

Posted in economy jasonn's blog