Taxpayer refrain to Bush: 'No new withholding!'

March 17, 1992|By Karen Hosler | Karen Hosler,Washington Bureau

WASHINGTON -- President Bush's effort to stimulate the economy by cutting the amount of federal taxes withheld from paychecks each week may be both an economic and political fiasco.

People across the country are rejecting Mr. Bush's decision to unilaterally lower their refund checks from the Internal Revenue Service or put them in the position where they could owe the government money.

They are deluging corporate and government personnel offices to undo what the president did. And many are angry that they have to go to the trouble because of what they see as an election-year ploy.

"I think it's just stupid, like 'No new taxes,' " said Colleen Barber, an elementary-school teacher in Grand Rapids, Mich., who likened the tax change to Mr. Bush's broken tax pledge of the 1988 campaign. "It's just a game."

In its zeal to provide Mr. Bush with a step he could take on his own to try to boost consumer spending, without congressional approval, the White House did not calculate that many Americans have deliberately arranged to overpay their taxes each week to make sure they get something back at the end of the year.

"It was a misguided attempt" to solve a problem that didn't exist, said Diane Swonk, an economist for First National Bank of Chicago. "People are smart. You can't fool them. Especially in the pay-back '90s, they know you can't expect to pay less in taxes now without having to pay more in taxes later."

Mr. Bush announced the tax withholding change in his State of the Union address Jan. 28, which had been promoted for weeks in advance as his answer for lifting the nation out of the economic abyss that threatens his re-election this year.

"Millions of Americans from whom the government withholds more than necessary can now choose to have the government withhold less from their paychecks," he said. "Something tells me a number of taxpayers may take us up on this one."

Employers were ordered by the Treasury Department to put the change into effect by March 1. The reductions were made automatically and will remain in place unless individual employees fill out new W-4 forms asking that additional amounts taken out.

No official notification of the change has been made, but the IRS said it would advise taxpayers later this year if they appear likely to fall short when their tax bill comes due next April 15.

In many cases, the amount of extra money is so small -- it averages between $3.50 and $7 a week -- that workers have hardly noticed a difference.

"I really haven't noticed any change," said David Kilman, a letter carrier in Easton who figures he's getting an additional $7 every two weeks. "If we do have a little extra money, it just goes to pay bills."

Rhonda Remmers, who handles payroll for an oil-field service company in Kingsville, Texas, said the extra money in the pay envelopes was so minimal, "I can't say that his wonderful program is going to do any good at all."

"If you are only making a livable salary, what good is $12 a month going to do? That's not enough to put a tankful of gas in your car," she added.

But a lot those who have noticed the change on their pay stubs have no intention of spending the money.

"We've had a large amount of people come and ask to restore the with holding," said Barbara Lucas, a spokeswoman for Black & Decker in Towson, where 500 people work at the corporate headquarters. "They seem to believe that saving it is more consistent with a prudent tax planning strategy."

So far, 10 percent to 15 percent of the 600 employees at the McCormick Spice Co.'s plant in Hunt Valley have come forward to undo Mr. Bush's handiwork in hopes of saving their refunds, according to company spokesman Mac Barrett.

In Peoria, Ill., one-third of the 1,600 workers at the Keystone Steel and Wire Co. have filled out new W-4 forms to return their fTC withholding amounts to the previous level.

H&R Block, the tax preparation firm, has been fueling taxpayers' concerns with a national television advertising campaign that began March 1. The ad warns that refund checks could be reduced or eliminated next year and offers to fill out W-4 forms for free.

"We just don't want our customers to be unhappy next year and blame us," said Ray Hite, manager of the H&R Block offices in Washington. He said most of his customers have requested the change.

"It's a sad commentary that people would rather give the government an interest-free loan because they don't have the self-discipline to put the money in a savings account," observed Gary Foster, a White House spokesman.

Fred T. Goldberg, assistant treasury secretary for tax policy and a former IRS commissioner, said he can't figure out why 72 million Americans -- or 80 percent of the taxpayers -- are letting the government hold larger and larger sums of their money each year.

The average tax refund is about $1,000 and creeping higher, he said.

"I think a lot of people just don't like to mess with tax forms" and thus don't bother to change their W-4s when their tax status changes, such as after the birth of a child, he said.

Larry Rollins, a Washington County building inspector, is doing what his government hopes -- almost. "I'm putting it right back into savings," he said of the $10 extra he's getting each week.

But no one's out there spending up a storm to help Mr. Bush win re-election.

"I don't think Bush is gaining any points out of this," said Kathy Bartow, an administrative officer at the Kingsville Naval Air Station, who barely "breaks even" with the tax man each year. "He thinks we're stupid. I think people see through that."

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