More tax refunds going toward debt

IF YOU GO

>> WHAT: The newly formed Rio Grande Valley Tea Party Association is having a Taxed Enough Already (TEA) Party in McAllen.

>> WHEN: 5:30 p.m. to 7:30 p.m. today.

>> WHERE: Archer Park, 100 N. Main St., McAllen.

>> MORE INFO: http://mcallenteaparty.webs.com/

McALLEN — Rudy Lopez has already filed his taxes and spent his entire tax refund paying down loans he borrowed for living expenses.

Uncertain when he would again find lucrative work in the South Texas oil fields, the 40-year-old father of three used his refund frugally and reduced his debt by close to $2,000.

In previous years, he might have spent it differently, but like many Americans facing an uncertain economic future, a tax-refund shopping spree is out of the question.

"We make a lot of money, but we spend a lot of money, too," said Lopez, who was laid off in December and now collects about $800 in unemployment insurance benefits every 15 days. "We don't know when there'll be work. ... They told us to wait three or more months."

The deadline for filing a 2008 tax return is today, and more people will be doing the same thing as Lopez when they get their refunds.

The frugality is a crushing blow to retailers who hope tax refunds will boost slumping sales. While the cost-cutting makes sense for individuals, it will not immediately help the consumption-dependant U.S. economy to recover.

Even in the Rio Grande Valley, which has been sheltered from the worst of the downturn, tax preparation services said they have seen more people planning to pay down debt than in previous years.

"These are hard times and people are really trying to cut down on spending and trying to reduce their debt," said Victoria Guerra, owner of MVP Tax and Financial Center, 914 N. Main St., Suite 4, McAllen.

But of course, she's seen quite a few people planning to spend big, including a married couple who intend to renew their marriage vows in an elaborate church ceremony. And then there were the guys looking forward to gambling in Las Vegas.

Fifty-four percent of people receiving a tax refund plan to pay off mortgage, credit card, utility and other bills, according to an Associated Press-GfK poll released earlier this week. That's up from 35 percent who said the same thing in last year's poll.

And while the average refund is up this year to $2,700 from $2,500 last year, the 38 percent of people who planned to spend their refund will apparently use the money for basic needs, according to the poll.

Scott Park, 33, flew a kite on a sunny afternoon with his wife and two girls at Bill Schupp Park in McAllen. A mail carrier for the U.S. Postal Service in Mission, Park said he added brickwork to his home with his tax refund.

Cost-cutting at the Postal Service reduced his hours earlier this year, but the family has made prudent investments and didn't have to worry about paying down debt or saving, he said.

About 57 percent of adults expect to receive a refund this year and about 5 percent of those people said they would go on a shopping spree.

On a nearby circuit path at the park, 72-year-old Rolland Hanyes said he did nothing special with his refund.

Retired from teaching, Hanyes said he has been relatively unaffected by the economic downturn, something he attributed to fiscal discipline. Unlike others, he had no debt to pay down.

"I've learned to spend wisely," he said, adding that he planned to take part in today's McAllen Tea Party demonstration to protest current tax policy. "I don't use credit cards unless it's an emergency."

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Sean Gaffney covers business, the economy and general assignments for The Monitor. He can be reached at (956) 683-4434.