Computed & Uncomputed Bonus

One of Washington's more arcane arts is estimating beforehand the amount of revenue the Federal Government will receive in any given period. To predict how much money U.S. corporations and 65 million individual taxpayers will be paying in taxes, the Treasury feeds a complex series of figures, estimates and hunches into its computers. In recent years it has been able to guess within one-half of 1 % of the vital figure. Not so this year. As the fiscal year ended this week, the Treasury found itself with a puzzling $1.6 billion more than the $47 billion it had estimated it would receive, an unprecedented bonus of 3.4%.

The unexpected tax haul enabled Budget Director Charles L. Schultze, 40, a former University of Maryland economics professor who took over the job on June 1, to close the books on the world's largest budget with a deficit of $3.8 billion, $2.5 billion below January estimates and the smallest deficit since 1960. It also pleased--and puzzled--Treasury Secretary Henry Fowler and caused the Treasury to begin a re-examination of its entire estimating procedure. Says Fowler: "If there had to be that big an error, I'd much rather have it on the plus side than on the deficit side." Where on earth did the extra money come from?

The Treasury will not have all the figures for another six months, but it already seems clear that U.S. prosperity proved even greater than the tax men had anticipated. The booming 1964 economy lifted personal income $3 billion over estimates, thus adding $400-$500 million to the Government's tax take. The stock market, which had been rising steadily until it began to dip in May, provided taxpayers with an additional $1 billion in capital gains--and gave the Treasury $300 million more in revenue. The Treasury even got some unexpected tax money from higher-than-anticipated cigarette sales.

The Treasury figured that the 1964 tax reduction would cost it $300 million more than it actually did, and this error, too, contributed extra income. Help also came from the computers: mindful that the Internal Revenue Service is checking a growing number of tax returns at its eight computing centers (it will eventually check all of them), taxpayers have become more scrupulous in reporting their income. This enforced honesty added $200-$300 million more to the harvest.

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