Who Has a Dime to Spare?

Lyndon Johnson borrowed money to pay taxes. So did Harry Truman. And in the space of a few hours, San Francisco's Bank of America lent $75,000 to one harried taxpayer, $100,000 to another.

Income tax day is always something of a shock, but this year it proved a positive trauma. The reason, paradoxically, was the $11.5 billion tax cut enacted 13 months ago. While Congress reduced income tax rates in a two-stage, two-year process, it slashed the uniform 18% withholding rate to 14% in one swoop. The result was that about 20 million of the nation's 65 million taxpayers did not have enough withheld from their salaries, had to cough up some $500 million more.

Salaried taxpayers in the middle and upper brackets took the worst beating. If he took the standard deduction, for example, a $20,000-a-year man with a wife and two children wound up $707.21 in the red--even though $2,975.79 had already been withheld. The smaller the brood, naturally, the more to brood about. While a married man with two children and an income of $7,500 came out $52 ahead, the $7,500-a-year career girl found herself $168.20 in debt to the Government.

Capitalizing on the situation, one New York bank ran newspaper ads showing a well-dressed man imploring a woman, "Could you spare a dime, Lady? I have to phone Bank of Commerce and arrange a $5,000 loan to pay my income tax." In Southern California, the Bank of America's loan business was up 18% .

Bighearted as always, the Internal Revenue Service said that some taxpayers would be allowed to pay later, but would be charged 6% interest in the meantime. In Congress, Republican Senators accused the Democratic Administration of having played politics by slashing withholding rates to make the tax cut look bigger, proposed eliminating the interest charge for tardy taxpayers. Though the move was defeated, 37 to 29, the Administration let it be known that it was thinking of introducing graduated withholding rates--taking bigger bites out of the higher-income brackets to avoid underwithholding in the future.

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