Brokers and accountants busy explaining new tax laws
Boston — It was just going to be a quiet gathering of a few people to talk about the new tax laws. The manager of the Brookline, Mass., office of Bache Halsey Stuart Shields Inc. rented a conference room big enough to hold 150 people, far more than he thought would be needed. He also set aside a little time at the end for a question-and-answer period.
The 180 people crammed into the room listened to Bache tax experts for a little over half an hour and spent the next two hours asking questions.
That kind of response has been typical for the accounting firms, brokerage houses, and financial advisers offering to help clients and the general public through the labyrinth of the Economic Recovery Tax Act of 1981, signed by President Reagan in August.
"There's more interest in this tax bill than in any tax bill in the last 20 years," says Steve Holub, on the staff of the tax department at Laventhol & Horwath, certified public accountants. "That's because it's the first real tax cut in 20 years. Prior legislation was more a matter of social reform. Now we have substantial cuts in the taxes people pay. This bill has something in it for almost everyone."
And almost everyone, it seems, is asking for information on how he can take advantage of the new tax law. And almost every firm that has tax and accounting experience is turning out a brochure, seminar, or a series of special newsletters pointing out how the tax law changes will affect charitable donations, small businesses, retirement plans, business investment, energy taxes , and estate and gift taxes.
Bache, for instance, had half a million booklets on tax law changes printed and in the mail by Aug. 15, two days after the bill was signed. They're all gone.Arthur Andersen & Co., accountants, printed nearly 300,000 booklets -- all gone too.
John W. Hamm, a tax specialist at Arthur Young & Co., conducts tax-law seminars every year."Attendance has more than doubled at most of them," he said. In Dallas, for instance, the firm's seminars usually draw fewer than 500 people. This year, over 1,000 showed up.
On the night of Mr. Reagan's budget-social security speech last week, Merrill Lynch, Pierce, Fenner & Smith Inc. held a nationwide seminar in 30 US cities. The seminar was "led" by Merrill Lynch executives and tax specialists in New York and fed via satellite to the 30 locations, as well as to some 200 private cable television companies around the nation, said Daniel Zeising, with the firm's Boston office.
On Oct. 14, Paine, Webber, Jackson & Curtis Inc. will hold its own nationwide seminar on the tax changes.
And unlike previous years, most of these seminars, which are usually free, are drawing people from all income groups. For instance, Mr. Hamm says, the well-to-do want to know about things like deferring the sale of stocks and bonds until next year, when taxes will be lower, and making their charitable deductions this year, while taxes are still higher. Middle-income people want to know about such details as how to set up individual retirement accounts, now that they are available to all workers, not just those without a qualified retirement plan and employees of nonprofit organizations.
"Before, people thought of IRAs [individual retirement accounts] as a tax-saving vehicle," noted Gerald Rosentrach, a vice-president and director of marketing at Bache. "Now, they see it for what it was intended, a retirement account." If a person could put $2,000 a year into an IRA earning an average 10 percent interest, he pointed out, the account would be worth $126,000 in 20 years.
"People want to know about things like that," Mr. Rosentrach said. "They are concerned about the future of social security and they're saying, I've got to plan now.'"
Planning, it seems, was a big part of the competitive effort to get the booklets out and seminars set up as quickly as possible. At Bache, Rosentrach says, most of the brochure was written in the firm's Washington offices before the final tax law was passed and Congress made its alterations. At one point, he noted, a Bache employee stayed on Capitol Hill through one late-night session , returned to the office with his notes, and slept while his colleagues used the notes to make changes in the book.
It is not just individuals and corporations who are asking about the new tax laws, Mr. Holub of Laventhol & Horwath says. One of the most avidly interested groups is the nation's charities. Many of them are worried that they will lose donations because upper-income people, who will now have to give a smaller proportion of their income to the tax man, have less incentive to give.
"The charities are telling people to give now, before the end of the year," he said. "And they're also trying to get things moving to change the laws again." Some charities, particularly those in the arts and humanities, might start looking to the "little guy" who has never given, hoping to make up in volume of contributions what they're losing in size.