Tax Rebates Have Limited Impact
The Economic Stimulus Act of 2008 included tax rebates that were supposed to help with the effort to jump start the economy. Debate related to the relative effects of government spending versus tax cuts was reignited in the press as the act was designed and then passed. This report (see link included below) completed by the Federal Reserve indicates that only one-fifth of those surveyed significantly increased their spending due to the rebate. More than one-half of those surveyed used the money to primarily pay off debt. The evidence is that only one-third of the rebate was spent (this is much lower than hoped for). The results further explain why short-term increases in government spending has a much greater positive impact on the economy than tax rebates when the economy is in recession.
The link is: http://www.federalreserve.gov/pubs/feds/2009/200945/200945pap.pdf