Rebate Money - Where Is It Coming From If We Are In Deficit?

What happens to the taxes that go into the trust funds?

Tax income is deposited on a daily basis and is invested in "special-issue" securities. The cash exchanged for the securities goes into the general fund of the Treasury and is indistinguishable from other cash in the general fund.



What were the amounts of securities bought and sold during recent years?

The amount bought in 2007 was $1,069 billion, while the amount sold was $879 billion. See investment transactions for more detail and earlier years.

Why do some people describe the "special issue" securities held by the trust funds as worthless IOUs?
As stated in the answer to "What happens to the taxes that go into the trust funds?", most of the money flowing into the trust funds is invested in U. S. Government securities. Because the government spends this borrowed cash, some people see the current increase in the trust fund assets as an accumulation of securities that the government will be unable to make good on in the future. Without legislation to restore long-range solvency of the trust funds, redemption of long-term securities prior to maturity would be necessary.


What is SSA's reaction to this criticism?

Far from being "worthless IOUs," the investments held by the trust funds are backed by the full faith and credit of the U. S. Government. The government has always repaid Social Security, with interest. The special-issue securities are, therefore, just as safe as U.S. Savings Bonds or other financial instruments of the Federal government.

Many options are being considered to restore long-range trust fund solvency. These options are being considered now, over 30 years in advance of the year the funds are likely to be exhausted. It is thus likely that legislation will be enacted to restore long-term solvency, making it unlikely that the trust funds' securities will need to be redeemed on a large scale prior to maturity.

Remember, this is your money you're getting back, and the rebate checks are basically an advance on your 2009 refund. When similar rebates were sent out in 2001, said tax expert Mark Luscombe, "a lot of people were upset to see their (next) refund reduced."

The only people for whom this really is free money are low-income folks (those who earn at least the minimum $3,000 required to trigger the checks or who receive at least $3,000 in Social Security or veterans benefits) who won't end up owing any taxes for 2008. If that's your situation, or you somehow wind up with a check when you technically shouldn't have -- you earned income in 2007 but won't in 2008, for example -- you won't have to pay back the money, said Luscombe, a principal analyst for tax research firm CCH.

so we get a check for 1200.00. Next year we'll be taxed on it? Next year it's declared income? Since I'm self employed do I have to pay 15.3 %SEP on this money?

What if i don't want the damn money?

easy on that old rockers in rocking chair stuff lady... :wink:

I mean physically, where is the money coming from for all of the rebates being sent out?

I'm picturing that I have a checking account. I have a balance of negative $X trillion dollars. I write checks to a million people. How do I cover the checks I've written? Where do I go to put the money needed into my account before the checks hit?

(Ignoring that I wouldn't really be allowed to have a checking account in negative balance for very long by any real bank.)

I'm assuming this rebate will work much the same as the last one where it will have to be claimed as income for 2007, so we will still (some of us) be taxed on it.

Interesting article:

http://articles.moneycentral.msn.com/Taxes/Advice/TheDetailsOnTaxRebates.aspx

Quote:

Remember, this is your money you're getting back, and the rebate checks are basically an advance on your 2009 refund. When similar rebates were sent out in 2001, said tax expert Mark Luscombe, "a lot of people were upset to see their (next) refund reduced."

The only people for whom this really is free money are low-income folks (those who earn at least the minimum $3,000 required to trigger the checks or who receive at least $3,000 in Social Security or veterans benefits) who won't end up owing any taxes for 2008. If that's your situation, or you somehow wind up with a check when you technically shouldn't have -- you earned income in 2007 but won't in 2008, for example -- you won't have to pay back the money, said Luscombe, a principal analyst for tax research firm CCH.