Gary writes:

> My experience doesn't bear this out Wirt.  Having looked at my wife's
>  payroll stub, I can assure you that her take home pay has increased, while
>  nothing else has changed.

The tax tables are essentially a piece-wise linear approximation to an offset
exponential curve at the bottom of the chart and a linear line once you move
off of the top of the chart.

The tax rate in effect for the bottom of the table at the beginning of the
year was 15% of monthly wages between $221 and $2,392/mo. The July 1st tax
rates are identical for this bracket, even though this is the bracket that
received the greatest rate reduction, 33%, by Congress earlier this year,
being reduced from 15% to 10%.

For a more middle-class bracket, the tax rate was in the first half of the
year 28% for monthly wages between $2,392 and $5,183/mo. The rate is again
identical for the second half of the year in its breakpoints and base
payment, except that the new deduction rate is 27%. Thus there is some
reduction in current payroll deductions in this bracket, but again it is
nothing like the amount that the current code calls for.

The rationale for the "refund" that is being sent out now is that you
overpaid your taxes in the first part of the year. Nonetheless, in either
bracket, if you overpaid in the first half of the year, you will continue to
overpay in the second half of the year as well.

Several people have asked me privately isn't this "advanced payment" the
definition of a refund. I'm not sure what to call a process where the money
flows in a tight circle such as this. On one hand, you are simultaneously
getting an "advanced payment" on your coming refund, while on the other, you
are purposefully overpaying your payroll deductions, based on current code.
And the question continues: is this really a loan? The only answer that I can
give is that you will get some of your 2001 refund now and you will have to
pay that portion back in the spring in the form of a lessened refund then. In
effect, that's identical in process to the "anticipation loans" that H&R
Block offers, but without the interest.

Perhaps the proper phrase is an "anticipated partial refund payment".

Wirt Atmar

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