The next big rebate from the IRS

Friday, Uncle Sam will start mailing checks to some 25 million Americans as part of the president's plan to stimulate the economy. In Northfield, Ill., Lynne Brenner, a divorced mother of two girls, knows where the money is going: school supplies, books, and clothes. "Kids are expensive and book fees are a lot," says the fitness-center manager. "Whatever's leftover after supplies, we'll go to Old Navy."

That's exactly what the government hopes will happen over the next three weeks as the US Treasury mails out some $14 billion in child-care tax-credit checks. The checks are one of the most important - and visible - parts of the $350 billion in Bush tax cuts.

Although polls show many consumers say they will pay off bills, economists expect the money will really go to new purchases. The checks - up to $400 per child - are arriving about the time stores are cranking up back-to-school sales - their second most important shopping season. Consumers will be enticed to spend the money on sneakers, jeans, notebooks, and computers.

"The timing of the tax cut is perfect," says Sung Won Sohn, chief economist for Wells Fargo Banks in Minneapolis. "It's one of the reasons why we are projecting the economy will perk up in the third quarter, hopefully averaging over 4 percent at an annual rate."

Thursday, President Bush, in an indication of how important the checks are politically and economically, went to Philadelphia where some of them will be printed.

For their part, Americans won't have to file any forms or do any work to get the money: The IRS will mail the checks out to people who filed for a child tax credit last year. The Internal Revenue Service will send out letters notifying recipients, and filers can check their status on the IRS's web site.

Yet not everyone with children will receive the checks - a fact that sparked a major dispute in Congress. Some 16.5 million low-income families will be excluded because, with their earnings of $10,500 to $26,625, they don't make enough to pay income taxes.

Last month, the Senate sliced $4 billion from other programs and extended the tax credit to those families. GOP moderates urged the House to pass the Senate bill quickly. Instead, the House Republican leaders passed an even larger bill, including tax breaks for military personnel, at a cost of $82 billion. Since then, House and Senate negotiators have been stymied over how to go forward, including on the issue of whether the tax break should sunset. Thursday, President Bush, while watching the checks get printed, urged compromise.

Those who will get the checks are expected to hot-foot it to the malls or maybe a tourist destination. "My guess is most people will treat it as a windfall," says Kate Krause, associate professor of economics at the University of New Mexico. "I think they will do something I might characterize as a luxury expense instead of a day-to-day expense."

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