Rebate, or an advance?

8/9/2001

If you get a federal income tax refund each year and use it, say, for a home improvement project, a swell vacation, or gifts for friends and family, you might want to save rather than spend that federal rebate check.

That's because all the spin about a “tax rebate” isn't quite accurate. What you got, or soon will, is an advance on the refund you expect after filing next year. And if you normally end up paying at filing time in April, you could owe an extra $300 to $600 in 2002.

Then, to confuse you more, the federal income tax forms you fill out next year, to avoid giving you a second tax cut, will use the old 15 percent rate for singles or marrieds filing jointly, instead of the new 10 percent rate so highly touted when it was passed.

The whole idea, and yes, it was a Democratic suggestion, though one doesn't hear Democrats much associated with it, was to dump a huge chunk of spendable income into the economy to kick-start it now, letting next spring take care of itself.

But millions of Americans think they're getting money back, not an advance against what they'll ultimately owe.

It's confusing, it's misleading, and it's poor public policy to misrepresent it, even if unintentionally.