Tax Foundation Predicts Tax Freedom Day Will Be May 4
WASHINGTON (AP) _ Just when you had finished your 1986 return and thought it was safe to forget about taxes for awhile, the Tax Foundation predicted Tuesday that the typical American will have to work another 19 days to pay up for 1987.
Tax Freedom Day 1987 is May 4 - two days later than last year.
Economists at the non-partisan research organization calculate that if every cent a worker earned during the first part of the year were earmarked for federal, state and local taxes, he or she would have to toil for the tax collectors through May 3. Viewed another way, an average person will have to work two hours and 43 minutes of each eight-hour day to pay taxes.
″This year, the American taxpayer has returned to the same point he was at prior to passage″ of the 1981 federal tax cut, the foundation said. Those across-the-board reductions were wiped out by subsequent federal tax increases and a growing tax burden at the state and local levels, the analysis said.
The news came a day before the deadline for filing federal tax returns - a chore that perhaps 10 million Americans were putting off until the last hours. Returns must be postmarked by midnight Wednesday.
As the deadline approached, financial institutions were doing a booming business in Individual Retirement Accounts, which - after these returns - will no longer be universally deductible. Professional returns preparers had all the business they could handle and Internal Revenue Service offices were swamped with last-minute pleas for advice.
The IRS expects 6.5 million couples and individuals to avoid the filing deadline by mailing a Form 4868, which will bring a four-month extension. But that form must be accompanied by a check for any estimated tax due.
There’s another way to stay the inevitable. Any taxpayer who is out of the United States or Puerto Rico on April 15 gets an automatic two-month extension in the time to file and to pay any tax.
The IRS has been processing returns without any major hitches this year, but the agency says anyone who waits until the last day to file should expect to wait longer for a refund. Although most refunds will be processed in six to eight weeks, IRS spokesman Larry Batdorf said Tuesday, some may require up to 10 weeks.
Through April 3, the IRS had received more than 58 million returns, and 78 percent of them had resulted in refunds totaling just under $30 billion. For all of 1987, the IRS expects 105.5 million returns.
This year’s filing season is the last before the big new tax overhaul takes effect. Accountants report that because of widespread news coverage of passage of the new law last year, many people have mistakenly concluded the provisions affect their 1986 returns.
In fact, virtually nothing in the new tax law will change the way a typical taxpayer files these returns.
The Tax Foundation, which comes up with a Tax Freedom Day every year, said the magic date in 1970 was April 28 and in 1950 was April 3.
The federal tax bill this year is less than it was in 1981 but higher than last year. Calculated on the basis of an eight-hour work day, the foundation estimated the average worker will have to work one hour and 46 minutes to pay the IRS this year, two minutes longer than last year but six minutes less than in 1981.
State and local taxes require another 57 minutes’ labor. When all taxes are combined, the cost is two hours and 43 minutes per day, the same as in 1981 and four minutes longer than in 1986.
Housing and household operations take second place, at one hour and 27 minutes; food and tobacco require an hour a day. The average worker puts in 42 minutes a day to pay for transportation and 39 minutes for medical care.
All the foundation’s calculations are based on the assumption that all taxes - including those collected from corporations - eventually are paid by individuals.
Meanwhile, a group of President Reagan’s supporters called Citizens for America launched a campaign against congressional efforts to cut the budget deficit by raising taxes. The campaign includes television commercials in the districts of key members of Congress.
″When our budget goes way out of kilter, it’s Congress and the poor managers in government who should start sweating, not the family in New Hampshire, Iowa or California trying to feed, clothe and house themselves,″ Gerald P. Carmen, chairman of the organization, told reporters.