Poll finds 45% of Americans to use tax cut to pay bills

By Thomas A. Fogarty
USA Today

Millions are seeing early benefits of the recent tax cut, and nearly half agree on a plan for the extra money: They'll use it to pay bills.

According to a USA Today/CNN/Gallup Poll, 45 percent of Americans who have seen an increase in take-home pay or who expect a child credit check from the government say the money will go toward bills. Another 31 percent say they'll save it, and 22 percent say they'll spend it.

To jolt the economy and to curry political favor, the $350 billion tax cut signed into law last month by President Bush calls for getting much of the money out quickly. Starting July 25, the IRS will mail 25 million checks for parents who qualify for an increased tax credit — up to $400 per child under age 17. Follow-up mailings Aug. 1 and Aug. 8 should deliver the money to most who qualify.

James Stone, 32, a mason from Worthington, Ind., expects a check for $800. His plan: Set the money aside for family needs when cold weather curtails his work. "It'll give us a big cushion," he says.

Scott Weigum, 33, a chemistry teacher from Bismarck, N.D., says the $800 he's expecting will help finance a Caribbean cruise or an ongoing car restoration. Weigum views spending the money as a duty. Says Weigum: "If you're a team player, you say (Bush) is doing this to stimulate the economy. So you take the ball and run with it."

The poll suggests muted public enthusiasm for the money from the tax cut, which also lowers tax rates on dividends and capital gains.

Just 34 percent say the legislation is likely to help their finances. Some 44 percent of Americans with household incomes of $75,000-plus say the tax act will help them, higher than any other group.

The child credit checks and reduced withholding are expected to leave Americans with an extra $36 billion in 2003. Whether a significant portion of the money will result in economy-boosting new spending is a matter of debate.

A 2001 University of Michigan study found that a similar injection of cash from tax rebates approved that year had only a small effect on consumer spending.

But Mark Zandi, chief economist at Economy.com, disagrees both with the new poll and in the Michigan survey, saying about $25 billion — roughly two-thirds of the tax cut money — will find its way into new spending this year. Zandi says the economic boost should be "very positive."

Zandi cites studies of 1975 and 2001 tax rebates that focused on economic effects, not public opinion, to conclude that most of the money will be spent this year. Says Zandi: "What people say and what they do are entirely different things."