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Tax rebates could be ticket to vacation
By Duncan Mansfield
Associated Press
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KNOXVILLE, Tenn. -- For many Americans, those tax rebate checks meant to stimulate the economy will be coming just in time - for a vacation.

The centerpiece of President Bush's $168 billion rescue package for a wobbly economy is a tax rebate program that will put up to $1,800 in the wallets of a couple with two kids in a matter of weeks, the prime season for planning summer trips and early fall getaways.

"The timing of this couldn't be better for travel tourism," said Steve Morse, an economist and director of the Tourism Institute at the University of Tennessee.

Some 130 million people will be getting checks - $600 for an individual, $1,200 for a couple, $300 for each child - from May 2 through July 11.

Critics suggest debt-burdened consumers will use the money to pay old bills, rather than make new purchases.

An Associated Press-Ipsos poll seems to confirm this - with 45 percent planning to apply the rebate to debt, 32 percent planning to invest it and only 19 percent planning to spend it.

"But we have seen some behavior that even when they are pinched, vacations are a right of life," Morse said. "People will borrow money to take a vacation, it is that important to them."

Morse and former grad student Warren Jahn make the case for tax rebate optimism in the tourism industry in a new report. It relies heavily on research by others and a previous study by Morse that plays down even rising gas prices as an obstacle to consumers determined to relax in the Great Smoky Mountains.

The research suggests that consumers will say "one thing before they get the money in their hand but after they get it, they actually spend more than they got in the rebate," he said.

Morse cites a November study by three economists from the Federal Reserve Bank, the University of Nevada-Reno and the University of Pennsylvania's Wharton School examining consumer habits from a similar though smaller rebate in 2001. The researchers tracked activity of 75,000 credit card accounts.

The study found that many consumers used the rebates to pay down credit card debt, just as pre-rebate surveys suggested they would do. But three to nine months later, they used their newly freed-up credit to buy even more. On average, they spent 40 percent more than the original amount of their rebate.

"If consumers use the 2008 tax rebate in a similar fashion as the 2001 rebate study suggests, consumers will spend more of the (2008) rebate than originally planned, generating opportunities for boosting 2008 travel demand," Morse's report says.

"We are sure hoping that he is right," said Leon Downey, chairman of the Southeast Tourism Society and executive director of tourism in the Smokies tourism community of Pigeon Forge.

Morse's report created a buzz last week at a Southeast Tourism Society meeting in Asheville, N.C. Hotel and travel destination professionals from 12 states - from Little Rock, Ark., to St. Augustine, Fla. - left with plans to order up ad campaigns and design getaway packages aimed at the rebate audience.

"We will be planting that seed," Downey said. "I think lots of people in the travel industry will do the same thing."

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Reader comments on this story - 15 total

Note: All views and opinions expressed in reader comments are solely those of the individual submitting the comment, and not those of the Pantagraph or its staff.

johnd wrote on Apr 8, 2008 6:08 PM:

" It will buy about 180 gallon of gas. No wait!Make that 150 gallons gas will be $4.00 when that check arives. "

ML wrote on Apr 8, 2008 5:09 PM:

" Not me. Mine is going towards the rent. :( "

Meh wrote on Apr 8, 2008 8:50 AM:

" New Nana, people don't go on vacation when they're struggling to pay their bills. Smokers are addicted, which messes with the demand curve for that product.

I love going on vacation, but I view it as a luxury. "

Pinko Commie wrote on Apr 7, 2008 10:20 PM:

" Ours is going right into savings, along with the rest of our money. Unlike most people we don't spend more than we make or spend just because we have it. Unfortunately people who save will be paying for the government to bail out those that don't. "

bnilguy wrote on Apr 7, 2008 5:40 PM:

" I love how the government's idea of a fix is to get us deeper in debt..which China is financing, which is what is killing the dollar, thus making gas so expensive, which is dragging us down even more. We need to face up to the fact that we have a lot of years of some sacrificing to get us back on solid financial ground..which according to my math means taking in more than we spend..so budget cuts and revenue increases (yes tax increases). Generations are going to pay for a few years of play. "

southsidepride wrote on Apr 7, 2008 2:05 PM:

" Thanks "the other dave"....if it weren't for you trying to tell me how to spend my stimulus check I would have no idea what to do with it. You truely are the voice of reason for all of us. Thanks again. "

nvme95 wrote on Apr 7, 2008 12:46 PM:

" If you spend the money in gasonline, it goes to Iran; spend it at walmart it goes to China....buy beer it's made in america! "

The other Dave wrote on Apr 7, 2008 12:40 PM:

" I agree that travel is great. People should budget their money and save for some trips. I have been all over the country and love to travel. My point is that you should plan and save for your travel. Not schedule it because of a government handout instead of paying existing bills. "

southsidepride wrote on Apr 7, 2008 12:29 PM:

" VEGAS BABY!!!! "

Super J wrote on Apr 7, 2008 12:23 PM:

" I'll be using this money to pay for my kids' college... 16 years from now. "

New Nana wrote on Apr 7, 2008 12:07 PM:

" To Meh....Rising gas and food prices are not going to keep people from traveling and/or eating, just like the rise in cigarettes did not keep people from smoking. As for The Other Dave's comments....I am all for people who want to take a vacation.....there are soooo many beautiful places within driving distance and some a bit farther. Have you ever been to Washington DC, the Grand Canyon, Yellowstone or Mt. Rushmore.....so much history and beauty. If you are a parent take your children, you will not be sorry for the "FAMILY TIME", even if it dips into your pocket a bit. "

Live Wire! wrote on Apr 7, 2008 11:59 AM:

" Your tax dollars at work! Paying for someone's vacation. "

The other Dave wrote on Apr 7, 2008 11:00 AM:

" If you have credit card debt, use this "free" money to pay down your debt. If you are fiscally sound and have no debt, save the money. The worst thing that you could do is to just go out and blow the money on the first thing you see, like a vacation.

If you were not planning it before this hand out, why buy it. "

Red Reeky wrote on Apr 7, 2008 10:34 AM:

" This is a collosal waste of money. Republicans & Democrats alike trying to buy the affection of the voters. As soon as the checks are cashed, people will start asking what else the govt can do for them. "

Meh wrote on Apr 7, 2008 10:24 AM:

" hahahahahahaa! What a joke. With rising gas prices and food prices, I think that most Americans will be sending that money straight into bills and credit card debt. There will be no economic boost from this stimulus. Watch for it. "
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