Retailers happy to help with that rebate

Let the angling begin.

Direct deposits of Uncle Sam's tax rebates started landing in bank accounts of recession-weary consumers Monday, and checks will be on their way starting May 9.

While there are dueling theories about how much of a jolt the checks will ultimately deliver to the struggling economy, retailers are already sidling up to shoppers like Dustyne Koob of Brainerd. They're hoping special deals and rebate- related discounts will get them in the mood to splurge.

"We'll save a third of it ... replenish our account from Christmas," said Koob, 36, who with a husband and four children expects to receive about $2,400. "Then we'll go shopping -- put money back into the economy."

That was the goal when the federal government approved the $110 billion tax rebate plan earlier this year.

The extra money is designed to propel consumers to open up their wallets and put some fuel back into the nation's sputtering economic engine.

Consumer spending drives more than 70 percent of the economy, but this year consumers have been hit with short and long-term economic worries. Gas and groceries cost more. Their homes and stocks are worth less.

The National Retail Federation estimates consumers will spend $43 billion, or about 40 percent, of their checks. If consumers live up to expectations, that will rank the rebate plan among the top three bottom-line boosters in retail -- after Christmas and back-to-school shopping,

But a rash of surveys shows consumers may not behave according to plan. They say they'll use the unexpected cash to pay down their credit cards, stock their freezers and fill up their gas tanks.

"Retailers will hardly see it," predicted Britt Beemer of America's Research Group, whose polling shows that consumers plan to use 70 percent of the checks to pay down debt, 10 percent for a "big night on the town" and 20 percent on retail.

That doesn't mean stores won't try. Wal-Mart, the nation's largest retailer, will cash checks at stores and plans to announce a tax-related promotion today.

Supervalu, based in Eden Prairie, will exchange the government checks for $300 gift cards and throw in a $30 bonus at its Cub Foods and other stores. Rainbow Foods' owner, Roundy's Supermarkets, has matched the deal.

Sears, Kmart and Lands' End will entice shoppers who spend their full rebate checks with an extra 10 percent off if they come in between May 14 and July 19.

Home Depot will urge customers to go green. The company will offer discounts through July on Energy Star appliances and fluorescent light bulbs. Medina-based Polaris Industries Inc. is urging people to use the rebate as a reason to come in and check out its all-terrain vehicles.

Splurging on glasses

Some 130 million low- and middle-income Americans will receive payments in the next 10 weeks, ranging from up to $600 for single taxpayers to $1,200 or more for couples with children.

Mary Ann Anderson of Minneapolis expects to get a $600 rebate.

"I just had to buy new glasses," she said. "Six hundred bucks. I had to charge it, so that's where my money will go. I'd like to get a new TV and maybe some new clothes, but the credit cards come first."

Loma Gong of Edina agrees. With four grown children still living at home, she's going for "just the basics."

"Maybe I'll buy gasoline and groceries," she said.

Ah, but consumers are notoriously unpredictable, pointed out Malachy Kavanagh of the International Council of Shopping Center, whose polls also indicate consumers want to pay down debt.

"We call it an intent survey," he said. "What people intend to do with the money and what people actually do are different things. They might really feel like splurging because everyone's been in a funk about the economy. This could feel like a windfall. We just don't know."

Economist Toby Madden of the Federal Reserve Bank in Minneapolis isn't making hard-and-fast predictions, but says retailers generally benefit when people have more money in their pocket.

Two Twin Cities-based heavy hitters -- Target and Best Buy -- say they'll stick to planned promotions rather than make a direct pitch for rebate checks.

Jeff Warner, of Warners' Stellian appliances, came to a similar conclusion.

"As a small, independent retailer, we'll be buried in a tidal wave of the national advertising," he said. "I don't think we're going to lose any face to the public by not trying to capitalize on their good fortune. We talked about it, and decided ... we'll stick to our promotions. Maybe a little mention, but we're not going to build something around it."

So too with businessman Denny Hecker, who owns 18 car dealerships in Minnesota.

"We're ... not put any fan-fare or whistle-blowing into this deal," he said. "It's in bad taste."

Staff writer Dee DePass contributed to this report. Jackie Crosby • 612-673-7335