Opinions vary on how consumers will spend tax refunds

After cutting back on discretionary spending for the past two years, will suburban residents spend their tax refunds this year?

A survey released Tuesday predicts that more people than last year indeed will treat themselves to a major purchase, but experts are split on that forecast.

The National Retail Federation survey found that 12.5 percent of people, up from 11 percent last year, plan to buy new furniture, a new television or a car with their tax refund.

"A little bit of 'free money' will go a long way for Americans this year," said NRF President Tracy Mullin.

She believes retailers planning special promotions over the next few months may find that shoppers are a bit more receptive to opening up their wallets than they have been for the past year or two.

Still, about 44 percent of those expecting a refund will use it to pay down debt, down from 48 percent in 2009, according to the survey.

And, local retail analysts don't believe consumers will be in a big hurry to get to the stores with their tax refunds.

"I don't see a big rush to buy," said John Melaniphy, president of retail consulting firm Melaniphy & Associates in Chicago. "Even if they do get a refund, consumers have become very stingy."

In addition, he believes many consumers will owe more and get less money back because of changes made in tax filing and many people earned less money last year. And Melaniphy and other experts do not believe the economy is that much better than it was last year at this time.

"The unemployment numbers are not good," Melaniphy said.

He expects that once the tax refunds start hitting consumers' bank accounts, the one bright spot may be in the restaurant business.

"People are suffering from cabin fever and may treat themselves to a nice dinner," he said.

Meanwhile, random consumers asked Tuesday about what they will do with a refund don't seem ready to go on shopping sprees. Lisa Pavett of Wheaton, who often used her refund for a vacation in the past, said she'll save half of her refund this year and treat herself to something she really wants with the other half.

Chris Krauss, who recently started a business in Arlington Heights, expects she will save her refund this season.

"I'll most likely be more conservative with my cash this year since I just opened a business," she said.

Vicky Homatas-Goudis plans to splurge and spend her money. "Maybe I'll spend it on a vacation," the DuPage County resident said.