Can federal stimulus checks shake up the local economy?
(La Crosse Tribune (Wisconsin)(KRT) Via Acquire Media NewsEdge) Apr. 27--The La Crosse area's economy will be getting an estimated $93 million cash infusion from the federal government in the next three months.
But how much of a local stimulus the federal tax rebates provide depends on how we spend the money, economists said.
The federal checks and direct deposits are scheduled to start this week, with the last of the mailed payments coming in July. How much you get depends on your tax-filing status, but they'll average $877 each, according to the Wisconsin Department of Revenue.
Of the estimated $2.1 billion in rebates coming into Wisconsin, La Crosse County should get $41.7 million, according to a Tribune analysis based on 2007 population estimates.
Another $51 million will flow into neighboring Wisconsin counties within the La Crosse retail trade area.
"Anytime you have $41 million coming into the county, that's huge," said Steve Christiansen, a local banker and chairman of the La Crosse Area Chamber of Commerce board of directors. "The business owners have to be excited about it. There's an opportunity there."
It's the economic equivalent of 27 WIAA state track meets, which generate $1.5 million in spending in the area a year.
But in the scope of the entire $3.3 billion local economy, "it's several ripples on the pond," said David J. Ward, president of NorthStar Economics Inc. of Madison.
"I think if gasoline dropped 50 cents a gallon, it would be a lot more helpful, but this doesn't hurt," Ward said.
How much economic impact the money has will depend on where it goes after it hits people's bank accounts.
"Are they gonna spend it or save it?" Ward said. "We don't have a real good record in this country of saving."
In proposing the tax rebates, President Bush and Congress hope consumers will spend the money to jumpstart the sluggish economy. But one study of the smaller 2001 rebates found only 22 percent of households intended to spend it.
Another survey found consumers spent about one-third of their rebates in the three months after receiving them.
A study of actual consumer credit card spending after the 2001 rebates found, on average, people initially saved some of the rebate by increasing credit card payments. However, their spending increased in the next nine months, representing more than 40 percent of the average household rebate.
"You're always going to have a certain percentage of the people who are going to spend the money. You have the conservatives out there who are going to save the money or pay off debt with it," Christiansen said.
Ward thinks it's realistic to assume half of the rebates will be spent. If La Crosse County residents get about $40 million, that leaves about $20 million.
"The more they spend it locally, to the extent they can spend it on locally made products and regionally made products, it's going to get spun into (the local economy)," Ward said.
If they hire somebody to fix their house, it keeps the money in the community as well. "To the extent people spend it on the upkeep of a home, the wages and labor paid for that stays local, too," Ward said.
"If three-quarters of the families spent their rebates on home improvements, it would have a huge economic effect on the local economy," said Bill Brockmiller, a labor market economist for the state of Wisconsin.
Even money spent dining out or for local entertainment gets circulated through the local economy, too, Ward said.
But if you spend it on a big-screen television at a big box store, the profits go elsewhere, and the wholesale cost of the TV "goes across the ocean," Brockmiller said.
"If they buy a book from Amazon.com, the money's really going to go outside the area," Ward said.
Is anything local?
Taggert J. Brooks, a University of Wisconsin-La Crosse associate professor of economics, cautions that "everything has outside components in it ... and if we spend more money on local items than items produced outside, that is called charity."
When money is spent locally, there's a multiplier effect, Ward said, which is the number of times it circulates through the local economy.
"If you have $40 million that comes to La Crosse County and $20 million is spent, most of it locally, then it has the effect of approaching $30 million" because the people who earn it turn around and spend it on other local products and services, Ward said.
"In the big picture, if you get a stimulus of about $30 million on a $3.3 billion economy it helps, but the bigger lift may be psychological as much as it's economic," Ward said.
Consumers pull back when they see gloomy economic forecasts, he said. "To the extent that they suddenly see a check there, the world goes on and they get back into a more normal pattern of spending."
Tax rebate FAQs
Q: How much will I get?
A: It depends on your tax status and income. The rebate is up to $600 for a single filer or up to $1,200 for married couples, plus an additional $300 per child under 17. But the rebates are phased out for single taxpayers making more than $75,000 a year after deductions and married couples making more than $150,000.
"To receive the maximum credit, individual net income tax liability has to be $600 for single filers and $1,200 for joint filers. Individuals who do not meet this requirement but who have at least $3,000 in earned income, including Social Security or veterans disability payments, would receive a minimum of $300. In addition, individuals eligible for rebates will receive $300 for each qualifying child. This means a married couple with two children earning less than $150,000 will receive up to $1,800," according to the Wisconsin Department of Revenue.
Q: When will I get my rebate check?
A: It depends on the last two digits of your Social Security number and whether you chose direct deposit for your refund. The lower the number, the sooner you get the rebate.
For direct deposit, if the end of your SSN is between 00 and 20, you'll get your money later this week. If it's between 21 and 75, you'll get it the week of May 9; between 76 and 99, the week of May 16. If you're getting a check in the mail, here's the schedule:
--00 to 09: May 16
--10 to 18: May 23
--19 to 25: May 30
--26 to 38: June 6
--39 to 51: June 13
--52 to 63: June 20
--64 to 75: June 27
--76 to 87: July 4
--88 to 99: July 11.
Q: Has the government given out tax rebates before?
A: Yes, twice. The first time was in 1975, under President Gerald Ford, when the economy was in a deep recession. Taxpayers got checks of between $100 and $200.
In 2001, President George W. Bush pushed tax cuts through Congress, and taxpayers got rebates of $300 to $600, as an advance on the tax cut.
Reid Magney can be reached at (608) 791-8211 or firstname.lastname@example.org.
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