Save the withholding tax

Who could say that the United States Senate doesn't have a sense of humor, or at least good timing! Here it is, April 15, the final day for most American taxpayers to file federal income tax returns, and the Senate has scheduled a vote on the controversial issue of whether to repeal the new law requiring 10 percent withholding on interest and dividends. Barring congressional action, the withholding provision will take effect July 1.

Advocates of repeal - spurred on by the blitz of mail from outraged private citizens (not to mention the lobbying of the banking industry) - insist that they have the votes needed to overturn the law. The withholding provision, supported by the Reagan administration, was one small part of the $99 billion revenue package that passed Congress last year. According to the Treasury Department, the new compliance measure will bring in some $22.7 billion from tax cheaters over the next five years. The whole point of the provision is not to penalize honest taxpayers who report dividend and interest earnings as required by law, but to target the scores of taxpayers who either deliberately underreport such income or fail to report it at all. The Treasury estimates that the government is cheated out of $7 billion to $9 billion in taxes annually. Withholding will enable the government to collect much, but not all, of that money.

The withholding provision makes good sense by every test of logic and fairness:

* The measure is not a new tax. It merely pulls the financial reporting and tax collection period forward in time.

* Withholding is not a novel concept. The government has withheld tax dollars on wages and salaries since World War II. As pointed out by Donald Platten, chairman of the Chemical Bank of New York, withholding is ''an entirely appropriate way of collecting taxes from both the individual taxpayer's standpoint as well as the government.'' Mr. Platten is part of a group of 20 or so leading banking and financial executives who met with President Reagan this week and agreed that the withholding provision should take effect. According to a spokesman for the First National Bank of Boston, which also supports withholding as part of the tax bill, ''We believe the tax act is important as a way to reduce the budget deficit. . . .''

* Almost all low-income and many elderly Americans will be exempted from withholding. So will savings accounts that accumulate $150 or less in interest annually.

* Actual losses to most taxpayers will be minimal. The Treasury estimates that a depositor who invests $1,000 at 9 percent compounded quarterly will lose less than 50 cents because of withholding.

What is still unclear, of course, is what impact the withholding provision will have on banking costs, particularly for smaller institutions that will not be able to absorb start-up expenses as easily as larger metropolitan institutions. That is a matter which the Treasury and Congress will want to watch closely with a view to possible future remedial legislation. But since the purpose of the new law is to help bring about compliance with the tax code and reduce federal deficits, lawmakers should go ahead with the withholding provision as scheduled.

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