Some people are savers, and some are spenders, but experts say that as federal tax refund checks arrive this summer, people are more likely to be spenders.
Families throughout Missouri and across America are receiving tax refund checks from the federal government. These checks are coming in amounts of up to $400 per dependent child. A family with three kids will receive $1,200 that they hadn’t planned on when they paid taxes last year.
The Jobs and Growth Tax Relief Reconciliation Act of 2003 increased the maximum child credit for 2003 from $600 per child to $1,000 per child. The law requires the U.S. Treasury Department to provide the difference ($400) as an advance payment. The last group of checks were mailed out Aug. 8 and many people have already earmarked how they will spend the extra cash.
At the Home Depot on Clark Lane in Columbia, customers are able to cash their refund checks on site.
“They can get their cash faster,” Ron Rounds, manager of the store, said. “Some people are using (their checks) to do home improvements and cashing the checks on site is allowing them do use it right here.”
Christina Miller, of Columbia, was at Home Depot on Thursday looking at flooring. Miller and her husband, Jay, spent the refund on remodeling their house. The Millers have two children and received a $800 refund.
“It’s already gone,” she said. “We painted, got a new front door, new carpet, and now we’re looking for kitchen flooring.”
Lowe’s, another Columbia home-improvement store, will also accept refund checks as a form of payment, as well as cash them with no purchase.
And of course, there are other options for using refund checks.
Columbia resident Tracy Worthington and her son Oliver were at Shelter Gardens Thursday afternoon. The Worthingtons will use their tax refund to help pay everyday expenses.
“We will use it to pay off child care costs throughout the year. Oliver starts kindergarten in the fall, so he will need after-school care,” she said.
Some people are also using their refund to help create a nest egg for the future.
Using the check to start a certificate of deposit or similar investment can be a good choice, according to Joe Miller, vice president of retail banking at Boone National Savings and Loan in downtown Columbia.
“We’ve seen an increase in deposits recently — whether that correlates to the refund checks, I’m not sure,” Miller said.
Miller, who has three children, did say what his family did with their refund check.
“It paid for our vacation,” he said.
While some local businesses are seeing an increase in sales and business, some said that not all of it is necessarily related to the refund checks.
Dave Guthrie, sales manager at Albert Buick, Honda and GMC Truck in Columbia, said that business has been very good lately, but that he didn’t necessarily see a correlation between the good business and the tax checks.
Because the checks are arriving concurrently with the back-to-school rush, businesses are seeing increased sales.
However, Ken Stieffermann, manager of the Rock Bridge Wal-Mart, said that he couldn’t say whether anything was directly related to the credits.
“I wouldn’t be surprised if people spent some of (the check) on school supplies,” he said.
Deanna L. Sharpe, associate professor of consumer and family economics at MU, said that from the perspective of economic theory, people should be rational and save their refunds. But in the real world, things differ.
“People being people, they are typically inclined to spend it,” Sharpe said.
Sharpe also said that whether or not families spend their refund generally depends on the family’s financial situation.
“I think you will see different types of responses,” she said. “If someone was in danger of being laid off, they would be more likely to save it. On the other hand, if things feel secure and it was more like a gift, they are more likely to spend it.”
And not everyone has to go out and spent their check.
“I know in our family, we think about where the refund could fit into our budget and where it could help the most,” Sharpe said. “We try and apply it someplace that will help our long term well-being.”