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OCR Page 1 of 39P Hw
THE WHITE HOUSE
WASHINGTON
THE PRESIDENT HAS SEEN
September 13, 1972
MEMORANDUM FOR:
THE PRESIDENT
VIA:
KEN COLE
FROM:
LEW ENGMAN
LAG
SUBJECT:
Memoranda from George Shultz
on Excessive Income Tax
Withholding Problem
The Treasury memorandum attached at Tab A discusses the
overwithholding problem created by the Revenue Act of
1971. The system was legislated by Congress, but Trea-
sury was remiss in not being alert to the problem as it
developed. The old system produced underwithholding in
about one-third of the cases, but the new one creates
overwithholding in about two-thirds of the cases unless
the taxpayer takes affirmative action to adjust by fil-
ing a special form (W-4).
Taxpayers made very few voluntary adjustments in 1972,
and as a result it is estimated that about $7 billion of
excessive withholding will have to be refunded in the
spring of 1973. Thus, we have had the worst of both
worlds. In spite of reduced individual income taxes,
many taxpayers have had less take-home pay in 1972 than
in 1971, thus slowing down economic growth. On the other
hand, the refunds will be made in 1973, when the economy
should be moving well.
A. Actions Taken by Treasury
Treasury is taking the following steps:
-- The withholding form (W-4) has been "simplified." "
-- Employers are being requested to make the new forms
available to employees and to assist them in re-
ducing excess withholding (with personal letters
from the Secretary to the chief executive officers
of the largest corporations).
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