Full Disclosure

A proposed statement from the IRS would make taxes more visible.


"It is doubtful that without [World War II] Congress would ever have voted for a tax so intrusive and troublesome," writes ABC's David Brinkley about the withholding tax in Newsweek. "Had people been forced to count out their taxes in hard cash for some government collector, taxes in such stratospheric amounts almost certainly could not have been collected."

Nobody believes that withholding taxes will be repealed. But some members of Congress hope to make all taxes more visible. In April, as last-minute filers prepare to mail their income-tax forms, Rep. Dick Armey (R-Tex.) plans to introduce the Tax Disclosure Act of 1994. If the bill passes, everyone who files an income-tax return will get an annual statement estimating how much federal, state, and local taxes he paid.

The one-page disclosure statement, which the Internal Revenue Service would send out with 1040 forms, contains entries that estimate both the amount in dollars and the percentage of income soaked up by that taxpayer's income, payroll, sales, gasoline, and property taxes the previous year.

The disclosure forms will, if anything, understate the amount of taxes each person pays. A draft version of the form contains a disclaimer which points out that some business taxes are passed along to consumers as higher costs. And, says the Cato Institute's Stephen Moore, who helped draft the idea when he served as a staff economist for Republicans on the Joint Economic Committee, the forms probably won't include local supplements to state sales taxes; these local taxes can exceed the statewide rate by 1 percentage point or more.

The purpose of the bill, says Moore, is to remind people how much in taxes they pay. "Some people I've talked to about this ask me if we're trying to start a revolution," he says. "That's the idea."