Evening star., 1950-05-22
6 Pct. Interest Paid
U. 5. By Taxpayers
Is Called Usurious
House Committee Cut
In Interest on Refunds
To2 Pct. is Criticized
By David Laurence

pOScu W 4CPl CoCL4S oAAS OchAPHJ - =
but more often they choose to
represent a spendthrift admin
istration even when 1t comes to
the simple question Of usury.
For centuries past usury has
been an opprobrious term applied
% excessive interest. 1t used to
practiced mostly by individual
money-lenders. Modern society
has applied limits to the amount
of interest that can be charged
by individuals or banks-but there
apparently is no limit to the usury
that is practiced by the Govern
ment of the United States itself
in the guise Of interest on taxes
Congress rightfully imposes g
penalty for failure to pay taxes
on time but, with the ambiguity
Of language in the tax laws nova.
days. years pass before 1t can be
determined in many instances
whether the taxpayer owes money
to the Government or the Gov
ernment owes money to the tax
payer.
Once the amount due is deter
mined-sometimes four or five
years after a tax return is filed
then the taxpayer is charged six
per cent interest for all the time
the Government has taken to
make up its mind as to what is
really due. Some taxpayers pay
as high as 80 per cent interest in
cases undetermined for five years.
Sometimes the Government has
to make a refund and up to now
1t has been argued that, since
the Government pays six per
cent interest on refunds, 1t is
logical that the taxpayer should
pay six per cent on any sums that
are determined finally as owing
to the Government.
In Favor of Government.
But the House Ways and Means
Committee last week voted to re-
duce from 6 per cent to per cent
the interest that the Government
will hereafter pay the taxpayer
on refunds while retaining the 6
per cent rate Of interest on any
thing the taxpayer owes the Gov
eminent.
This Is offered brazenly as a
means Of raising revenue. The
usurers Of ancient days also
wanted to raise money by manip-
ulating the interest rates. Thus
IN the future-unless the House
or Senate votes It down-wher
the Government has a refund to
make the interest will be in IA
vor Of the Government, and when
the taxpayer has extra taxes to
pay the interest also will be in
favor Of the Government.
It would be far better and
cleaner If Congress passed a law
fiatly penalizing taxpayer a cer-
tain percentage for making a mis-
take In figuring his taxes. At
least, this would have the virtue
of candor. But to collect revenue
in the guise Of Interest" from
taxpayers who make a conscien-
tious effort to pay the Treasury
what the best advice from tax ex-
pertS tells them is to use the in.
terest device as a punitive meas
ure.
The taxpayer is quite willing to
pay his taxes If the Government
will tell him promptly that he has
made an error. In fact, there
would not be the slightest objec-
ton probably from most taxpay-
ers II they are required to pay 6
per cent interest on any sums
determined within a year to have
been due. But when the Govern
ment takes four or five years to
make up its mind what is really
due, then the taxpayer is being
penalized 6 per cent a year for
waiting on Governmental red tape
to be unwound.
Statute of Limitations.
Under present practice, the tax
payer and the Government have
three years in which to revise or
correct tax returns and ask fol-
refunds or be required to pay
extra sums. whichever the case
may be. This is because the
statute of Limitations" is three
years from the day the income
tax returns are filed. Thus, re.
turns filed March Is, 1947, were
open for change until March Is
1850, but just few weeks before
the latter date the Government
presented tens Of thousands oi
taxpayers with what is known al
q waiver" requiring the tax.
payer to agree to three-year ex-
tension cor else"
The general opinion among tax
lawyers is that the waiver is q
form Of "blackmail" which would
be frowned on in business OF
finance, but the Government gets
away with 1t on the plea that il
hasn't got around to settling out
standing returns and needs more
time.
A simple solution of the prob
lem would be to keep the interest
rate at 6 per cent on refunds as
we'll as on deficiencies when either
Is determined within one year
from from the filing of income
tax returns. Anything which was
determined within two years would
be calculated on a 2 per cent basis
for all years from the time the
return was filed till the date OF
determination of the amount due
This would serve as an incen-
tive to the Government to clear ur
all pending cases promptly anc
would speed up cases involving
probable deficiencies where sizablt
amounts Of revenue are to bs
found