Tax outlook to year 2000: lighter load

The prospects for overall tax relief for Americans this year are favorable, say a number of experts. Tax relief at the state and local levels, they surmise , probably will offset inflation-spurred increases in federal income taxes and a legislated increase in social security taxes.

Further, the outlook for the rest of this century tilts in favor of a lighter load on taxpayers as the working-age population grows in relation to tax-supported nonworkers.

Tax experts contracted by the Monitor added, however, that how Congress and state legislatures respond to the fiscal needs of government is unpredictable. And they will have the final say on how much Americans pay in taxes.

In recent years federal taxes have been rising, relative to US economic output, while local levies have declined. State taxes have remained about steady.

"The net result is that taxes, in total, have stabilized," said John Shannon, assistant director of the Advisory Commission on Intergovernmental Relations (ACIR), an agency set up by Congress to monitor state- federal relations.

Mr. Shannon expects taxes to remain level in 1980. And he sees the possibility that federal taxes may be pared this year, which could bring a reduction in overall taxes. There is growing political pressure in Washington, he believes, to trim taxes this year to compensate for last year's torrid 13 percent inflation rate and to offset the effect of a recession this year, which some observes contend has already begun.

"There is going to be a showdown on federal taxes this year," Mr. Shannon predicts.

Total taxes in 1979 represented an estimated 28 percent of the nation's output of goods and services, as measured by the gross national product (GNP), according to the ACIR. That is about what they were in 1974.

However, within the overall picture there have been some dramatic changes. Local taxes have declined from 4.2 percent of GNP five years ago to an estimated 3.6 percent for fiscal year 1979.

Americans actually paid less in property taxes in 1979 than in the previous year, the first such annual decline in several decades. The 3 percent dip last year was principally accounted for by the huge reduction in California property taxes as a result of the passage of Propostion 13.

The Tax Fondation, a Washington research group, reports that taxes are being pared at the state level, too. Twenty-four state legislatures last year cut taxes by a total of $2 billion. That means total state tax receipts will grow, but by significantly less than would have been the case without the cuts.

Tax increases have been the rule at the federal level. Income taxes have risen automatically as inflation pushes taxpayers into higher brackets. Social security taxes have similarly been rising, and will take a sharp jump next year when the rate paid by workers climbs from the current 6.13 percent to 6.65 percent. The amount of wages subject to the tax will also increase from the present $25,900 to $29,700 in 1981.

Through the year 2000, pressure in the US for overall tax increases will abate, argues Tax Foundation economist. Elsie Watters. Over the next 20 years the ratio of people dependent on taxes (the elderly and school-age children) to working taxpayers will decline, she found in analyzing the US population.

The decrease will be in the number of persons 17 years old and younger who receive tax support for public schooling. The decline in this segment of the population will be greater than the increases expected among the elderly who are dependent on federal social security taxes.