![handle is hein.tera/crstax0369 and id is 1 raw text is: Order Code 94-593 EPW
Updated April 3, 2000
Social Security Taxes: Where Do Surplus Taxes Go
and How Are They Used?
David Koitz
Specialist in Social Legislation
Domestic Social Policy Division
Summary
Congressional Research Service +* The Library of Congress
CRS Report for Congress
Received through the CRS Web
The costs of the Social Secuity p~rog:raml bothi its benlefits anld adinilistrative
expentses, are finianced by a tax ont wag(-es anid self-employmrenit icome. Commonily
referred to as FICA anid SECA taxes (b-ecauise thiey are leviJed unider the Federal
Inanlce and Sel-Eploymentc11 ConwlibtlionsAct) these taxes flowN eachi day in1to
thIousandIs Of deCpository aCCOutts main11ta ied by the g-overrnmrent w\ith fintancial
inistitu~tionls across thiecoutryl-. Along wINith mIaIny othler formIsofrevenueIs, thleseSocialI
Secuirity taxes become part of the g-ov ernmenit.s oplerating cashi pooi, or wha]It is more
commtiolyN referred to as the U .S. treasury. fIn effect, onice these taxes are receiv ed. thiey
become inidistingui-ishabhle from othier mlonlies thle g-overnmrrent takes Inl. Th~ey are
accounited for sepiarately throughl-Il th~e issuance Of federal secu-rities to th~e Social SecurIity
trut-st fund1Cs whN Iich basically Iinvolv es a series of bookkeepilig enitries by the Treasuiry
Depiartmenit -but the trust funids thiemrselv es do ntot hiold rrontey. Thiey are simpily
accounlts. Similar,1-v benlefits are nlot plaid from11 thle truISt fundICs, bu)t froml the treasury-N. ,As
the chiecks are paid, secu-rities Of anl eqivNalelt vatile are w\\rittenl off' the trust funids.
G'enierally spieakinig, the federal secu~rities issu~ed to aNy federal trut-st funid repiresenit
permissioni to spenid. As lonig as a trust funid has a b)Ialnce Of suIch secu-rities, thle
Treasury Departmienit h1as legal au-thIority to keepl i*ssuing- ch~ecks for thle pirogramr. Ini a
senlse, the mrechianics of a federal trust funid are similar to those of a banik account. The
banik takes ]in a depiositor's mroniey, credits thle amoun]It to th~e dep)ositor's accoun1t, anid
thlen loan1S it ou-t. As long~ ais the aCeOLunt shiowNs a balanice, the depositor cani \\rite chiecks
thiat the banik mut-st hono1r. Wh'len more1- Social Secur1ity taxes are r-eceiv ed thant spenit, the
blan11ce Of securities pIosted to thle Social Secu-rity trut-st funtds ri-ses. Simply pu)Lt, th~ese
balanices, like those of a banik aiccount, represenit a promise -a formi of IM.U from thle
gYovernmen1crt thflat if nteeded to pay Social Secuity beniefits, the g-ov ernmrrent will1 obtain1
resour11ces equLal to thle valute Of the securities. The surp-11lus taIxes th~emselv es are thlen Used
for any\ of the many11 funictionls of g:ov ernmtrent.](ViewImageLocal?handle=hein.tera/crstax0369&div=1&collection=&method=preview&ext=.png&size=3)
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