Why Taxpayers Are Sore

By Marshall Loeb

Executive View

If it were not for a tightfisted great-aunt, Henry Bloch is convinced he would be just another Kansas City stockbroker today. The rich spinster rebuffed the ex-serviceman's plea in 1946 for a $50,000 loan to launch a large company that would sell office services to small businesses; she only lent him $5,000, Had she been more openhearted, Henry Bloch believes, he and his brother Richard would have started too grandly and quickly gone broke.

The Blochs got another tough break--or so it seemed--some years later. By 1962 their H. & R. Block Co. was doing well enough in tax consulting to go public, but a big underwriter backed out at the last minute. The brothers were forced to keep most of the stock for themselves. Today they have by far the nation's largest tax-preparation firm, and the shares of President Henry, Chairman Richard and their families are worth $81 million.

This season, more than 10 million taxpayers will go to H. & R. Block with all the gusto of visiting the dentist. So it is rather appropriate that Henry Bloch, 56, the chief executive and prime-time TV pitchman, looks like a small-town tooth driller. He is a direct, plain-spoken Midwesterner in a brown suit and brown shoes, the type of fellow for whom the word unpretentious was invented. For his prodigious charities and civic good works, fellow citizens named him Mr. Kansas City, but he hides most of his trophies and awards in a small, dark closet.

More than anybody else, Bloch knows the mood of Americans as the ides of April draw near. The 8,445 H. &R. Block offices and storefronts become confessionals, in which Americans pour out their complaints, fears and frustrations (for an average fee of $25) to the company's approximately 50,000 moonlighting teachers, accountants and other tax preparers.

Bloch's battalions tell him that tax tensions run high. "Talk of tax revolt has been grossly overstated," says he, "but it probably wouldn't take too much to trigger some type of rebellion." He frets that a demagogue may catch the public fancy by thundering for reducing taxes without reducing spending.

"People are mad because they don't understand the system," Bloch believes. "The old and the poor do not understand why they should pay anything to anyone. Retired people complain about paying taxes on interest income. Middle-income people feel that they are grossly overtaxed because Government programs are aimed at aiding lower-income people."

Nobody seems to have any idea how much taxes he pays in a year, Bloch finds. All each person knows is what is withheld from every paycheck. The loudest complaint is that the IRS tables did not provide for enough withholding in 1978, so many taxpayers still owe the Government money, and that hurts. Some people simply do not file returns and hope that the IRS does not catch them.

Yet Americans are basically honest, Bloch has learned, and few cheat. To the contrary, they want a trouble-free return, and they do not take chances because they fear being audited. (Only one in 50 will be, though the proportion rises sharply with income, so that one in ten $50,000 earners will face an inquisition.) Americans choose to overpay rather than deduct an expense that might be questioned. Lower-income people are the most scrupulous of all because they are fearful of bureaucrats and bosses and worry about having to take off half a day from work to answer to an auditor. Upper-income Americans are more willing to take risks, in part because they can afford smart lawyers and C.P.A.s should they be questioned. But the scare talk about the three-martini lunch has made businessmen wary of deducting ail their entertainment expenses.

For all its flaws, Bloch is persuaded that the U.S. system is fair and equitable, that the continual changes that make it maddeningly complex are generally improvements. "But what worries me most," he says, "is the bad and dangerous tendency to eliminate more and more people from the tax rolls. Today a married couple earning less than $5,200 doesn't have to pay anything. I think that just to live in this country, you should pay some tax. I don't care if it's only $1 a year. After all, you can vote. A lot of federal funds are being expended for your wellbeing. So you should contribute in some way. It sort of teaches you a way of living and being part of society."

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