Tax Rebates and Spending

This article originally appeared in the Detroit News on July 29, 2001 at 

By Laura Berman / The Detroit News

A Greek Isles cruise is impossible. A red Maserati or even a new couch are out of the question.

Shopping smart has never been tougher.

Thousands of tax rebate checks are already in the mail. By the end of September, everyone on the IRS preferred customer list will have theirs.

All told, $38 billion is being sent out to create gratitude and spending.

And as one of those waiting for a tax rebate check from the U.S. Treasury, I wonder: How can a true-blue American stimulate the economy with $300?

Too small for jet travel, yet too large for apathy, the $300 check creates a quandary for patriotic taxpayers. Is there a best way to prod the economy, prevent recession and maximize personal use of $300?

Michael LaFaive, a policy analyst at the Mackinac Center for Policy Research, is a free-market economist. He compares the rebates to Milton Friedman's theory that cash dropped once from a helicopter won't bring any economic benefits. You have to keep dropping cash from the sky to change human behavior.

None of us has any special responsibility to spend the money in a specific way, he argued. "The responsibility we have is to maximize our own self-interest," he said. "I would enthusiastically encourage free people to spend the money any way they choose."

Spend it at Mira Linder's Spa in the City or give it to the Gleaners.

Although I am not an economist, and thus never considered that a facial might be just as socially beneficial as helping poor people get food, I have developed my own tax rebate spending plan.

It provides four options for improving Southeastern Michigan's economy:

* Manufacturing: Time-share a Ford Explorer. Call 99 friends and pool resources to buy a 2002 model. Each of you can drive it 3.65 days a year. On the 361.35 days when someone else has it, you'll glow from inner satisfaction, aware that you've helped keep a troubled automaker going.

* Arts and entertainment: Buy one upper-level seat at the Palace of Auburn Hills for next month's Madonna concert. Or subscribe to a five-concert series at the Detroit Symphony Orchestra.

* Dining out: If you're careful, $300 will buy dinner for two at the very luxe Tribute. Or try a Lafayette Coney with everything for $2.10. You can eat one every other day for nearly a year.

* Casinos: Three pulls on the $100 slot machine at the Greektown Casino. If you win, invest the proceeds in downtown Detroit development.

Keep in mind that more than 1.1 million Michigan taxpayers earning less than $40,000 a year won't see a cent of the tax rebate. You might want to take one of them to lunch.

You can reach Laura Berman at (248) 647-7221 or