June 19, 1985
The President. You may have heard about our proposal to overhaul the tax code, make it fairer and simpler and more compassionate. And I wanted to bring the message directly to you in America's heartland. I've been traveling all over the country; the enthusiasm, I must say, for America's tax plan is overwhelming.
I call it America's tax plan because it will take the load off the back of the long-suffering American taxpayer. It'll take the low-income wage earner and the retired elderly off the tax rolls entirely, and it'll remove the tax distortions that I think are holding the American economy back from reaching its full potential.
Mac's Restaurant sums up our message in two words when they say, ``Treat yourself.'' Our proposal makes the system fairer. By closing loopholes and ensuring that all big businesses and individuals pay their fair share, we think we can lower the tax burden on everyone. And one of the best things about our tax proposal is the boost it'll give to America's mainstream.
We're cutting tax rates for small and entrepreneurial businesses. We're cutting top rate on personal income tax to 35 percent, on corporations from 46 to 33 percent, while keeping the graduated scale for small corporations. The tax rate -- or the capital gains tax rate again will be cut, this time to 17\1/2\ percent. The objective is to create a small business renaissance in America, to make this decade the age of the entrepreneur.
I read in the news that Bill Seashols said one of the strengths of Mooresville is that people still believe in the work ethic here and they emphasize the importance of family. Well, that's what America's tax plan is all about, too. It'll set our economy humming and be the best jobs creation bill, we think, that we've ever had.
And, second, it will give families and wage earners some long-overdue relief by increasing the standard deduction and practically doubling the personal exemption to $2,000. By lowering marginal rates, we'll allow the people to keep more of each extra dollar they earn. If you work overtime or get a raise or save some money and invest it, more of that extra income will end where it belongs: in your cash registers and pockets and not in Uncle Sam's wallet. By removing low-income earners from tax rolls, the climb up the ladder of success I think will be easier for everyone.
I'm excited about all the good things this plan will do for America. And if you're excited, too, and if you all think that our plan is good for America, maybe you could let those people there in the back of the room know.
Well, that's enough of the monolog from me. I think we're slated for something of a dialog, and I'd like to hear what you feel about our plan.
[At this point, several members of the business community spoke.]
Q. As a physician, many of my patients are older Americans, and they wanted me to ask you how your new tax plan was going to affect them as older Americans.
The President. Well, I think first of all that a great many elderly people will be at an income level -- in a retirement income level in which they won't pay any tax at all. They will benefit to the same extent that everyone else will with the reduced rates.
For example, today there are people at the poverty level that find themselves paying an income tax. In ours, let's say a family of four -- a husband and wife and two children -- at $12,000, they won't pay any tax. And then it starts at a 15-percent bracket and goes to the 25 and finally the 35.
I think that they'll find that there are many provisions in this plan that will be of help to them. Certainly they will not be penalized in any way.
Q. Thank you, Mr. President. My name is Bruce Marine, and my question is: Does the proposed tax reform shift the tax burden from the individuals to the business or from middle income to higher income?
The President. No, as a matter of fact it just, I think, treats everyone squarely. The one thing that is being done in business -- now, we're lowering the rate in the corporations. But also, we're taking away some so-called loopholes and some things that some businesses, based on the nature of their business, could take advantage of the present tax system to the point that even making a substantial profit, major corporations have not paid any tax at all because of some of the provisions of the present tax code.
We're changing that; we think that everybody ought to share and pay a fair share. As I pointed out, in small corporations, some of your businesses have incorporated. Well, in those the maximum tax, of course, is 33 percent, but for the smaller businesses, it'll be graduated. It'll be a progressive tax, so that before you get to the 33-percent bracket, there will be a lower tax that will be beneficial there.
Now, most of you, however, in small business pay on a personal income tax rate. So, you'll be benefiting also in that. And incidentally, while I'm here let me -- you said thanks to me -- let me say thanks to you. Do you know that in the last 2\1/2\ years, we have created some 8 million new jobs in the United States. We have averaged for these 2\1/2\ years 300,000 people a month finding work and going to work in this country. And the bulk of those are produced by small business not by the major corporations.
That's why at the recent economic summit I sat there kind of glowing inside as some of my colleagues -- the Prime Ministers and the heads of state and Presidents of the other European countries that were our trading partners and allies -- were telling me that they believe the answer to some of their problems -- because they haven't created a new job in Europe in 10 years. They have the same number of jobs that they had 10 years ago. And they were telling me that they believe entrepreneurship is probably the answer to their problem. [Laughter] I said I thought it might be. [Laughter]
Q. Mr. President, my name is Tim Currens. My question to you is: What effect do you believe the proposed tax plan will have on business growth, and are there any built-in incentives for business within the proposed tax plan?
The President. Yes, I believe the incentives that we have there are -- the whole thing is aimed toward growth and encouraging growth. Part of that is the reduction, again, of the capital gains tax, which we found -- you know, the capital gains tax is -- there's been some demagoguery around that that's a tax for rich people that can sell something for a profit and so forth. We found that with the two reductions in recent years -- the one in 1978 in the rate of that tax and then the reduction that we made in 1981 -- in both instances, the revenue from capital gains for the Government went up tremendously.
In 1977 -- or was it 1979, Don? I think it was '79 -- the pool of capital available, risk capital, for backing someone that wanted to start a business, as you did, was down to $39 million. By 1984, it was up to 4\1/2\ billion, and we think that a large part of that had to do with the tax change in capital gains.
Q. Mr. President, my name is George Smith. How do you see your tax program affecting interest rates on and the availability of money for single and multifamily development?
The President. Well, I think what the example I just gave -- I think is some of the answer to that. And I think it will. As to interest rates, as you know, yesterday the prime came down to the lowest it has been since 1978 -- down to 9\1/2\ percent. We think there are going to be further dips in that.
We have some of our short-term government paper now that is out at an interest rate of under 7, and that also is the lowest that it has been since 1978.
Incidentally, in answering both yours and the other question, too, I should have mentioned that I think that the very fact that we're going to be putting -- that the average individual is going to have more money in their pockets and take away from some of what they're giving to government -- it's going to make them better customers for all of you and be a stimulant to business just in that way alone.
Q. Bill Cherry, Mr. President, Plainfield Chamber of Commerce. I'd like to ask you, besides the deduction and the number of tax brackets, how else -- what other parts of your plan is going to simplify the system for most of us?
The President. Wow! You know, I may turn my head here to Don Regan again. If you haven't met him, Don Regan was Secretary of the Treasury when this plan was being created and is now the Chief of Staff. For me to try and off the top of my head bring up some of the other benefits -- now wait a minute. Again, you asked -- --
Q. -- -- simplification.
Q. -- -- down to three.
The President. Yes, it's 14 tax brackets; it's really down to four.
The President. There's one at zero.
Q. All right. Yes. [Laughter]
Q. -- -- some other points. Are there any other that you think might -- --
The President. In the simplifying of it? Yes, I believe we have -- in return for these grants coming down -- we have eliminated a number of deductions. And yet, for example, the deduction that has been taken and now will be eliminated -- of deducting local and State taxes from your income tax -- we discovered that two-thirds or more of the people in this country do not itemize, so they weren't getting that deduction anyway. And you only got that deduction when you got into the upper brackets. But we've also found out that -- as against the reduction in rates -- everybody still gets a tax cut even without that deduction.
We think it can be simplified at this extent -- and Don, you just interrupt me if I miss something here. We believe we're going to try something else in this that will be optional with the people and the nonitemizers -- that a person, if they decide to, can provide to their employer what things they have like interest on a home mortgage and so forth, and then the employer will simply direct to the IRS in Washington. Instead of sending you the form that tells you how much salary you got, they will simply send that plus your other figures to Washington, and you will receive direct from Washington without filling out any kind of a form -- you'll either receive a bill for tax if you owe some, or you'll receive the refund if, out of your withholding, you have a refund coming. You won't have to even fill out or sign a tax form, just send in the check or get the check. [Laughter]
And this we think -- now, again, as I say, that is optional. If someone mistrusts IRS and decides they want to take a look themselves, they're free to do that. The nonitemizers, of course, that will be very simple for them. We have left -- even though a recommendation was made earlier that we should eliminate the deduction for charitable contributions. We believe that in this country, which is so unique in all the world in voluntarism -- this country supports many worthwhile cultural activities by private contributions -- like symphony orchestras and so forth -- than all the rest of the world put together. And we thought we don't want to discourage in any way something that is so typically American.
It's believed there are some 95 million adult Americans today that are actually engaged in some kind of volunteer work, whether in their church or their community or the school board or whatever, in this country. And we think that's a much greater force for good than even government. So, we've left that.
But the number of reductions -- or deductions that have been eliminated, the increasing of the personal exemption -- almost doubling that -- then almost doubling the -- for each dependent, increasing the earned income tax credit, those things -- and then pretty much it's just a simple goal from there.
Q. Mr. President, we just have time for one short question.
The President. Well -- [laughter] -- --
Q. I shook hands with you earlier.
The President. Yes.
Q. I'd like to ask you the question here if anyone will pay more taxes?
The President. The only people that we can see that will pay more taxes are those that presently are unfairly not paying their share, those that have been taking advantage of so-called tax shelters and those, as I said, for example, at the major corporate level where they have found that they can earn a profit and escape paying any tax whatsoever.
But I tried one because, you know, some people have been throwing around the fact that this favors the rich. You might be interested to know that only 3 percent of the earners in America will be in the 35-percent bracket -- the top bracket. They will pay 14 percent of the total amount of tax revenue that the Government receives. So, it is not benefiting them, and yet they, too, will get a reduction -- the very fact that the more they earn, they get 65 cents out of every dollar. I remember back in those ``if'' days in Hollywood when I was only getting 10 cents out of every dollar. [Laughter] And I said no to a lot of parts I'd have liked to played, but I just wasn't about to work for a dime -- [laughter] -- on the dollar.
But the same is true with the middle class. And I did a little -- some pen-and-ink work myself one day. I had some figures for a town in New Jersey where I was speaking that I'd used in there about someone at about a middle-income range of $42,000 of income, family of four, and what the tax would be for them. And I got very curious. So, I multiplied by 10 on income to see about this benefiting the rich. And it is a progressive tax. And that has been the tradition since the income tax started, virtually, of -- that you not only pay -- you know, the Lord in the Bible says that tithing -- the Lord's share -- is a tenth. And He says if He profits you 10 times as much, you give 10 times as much. Well, under the income tax, when you start computing Caesar's share -- [laughter] -- with the progressive tax, it doesn't come out that way. It isn't proportioned.
So, I was very interested, with my figures, to take this family here, and then take this one over here that earned 10 times as much, and this one over here would be paying 30 times as much in tax as this middle class family here. So, that worked out pretty well.
Incidentally, there's another feature, too, in helping here. You know that right now the IRA's -- these independent retirement accounts where you can take $2,000 of your salary and put it in a bank account for retirement, and you don't have to pay income tax on that $2,000 -- and this has been true for male employees, female employees. And then we come to the husband and wife team where the wife is the housekeeper, and I think she's allowed about $250, isn't it? The man could take out $250 for her and so deposit $2,250.
Well, we happen to think that the housewife is very well employed, and from now on they'll be able to take out $4,000 and put it aside.
Well, I don't know if -- --
Q. Thank you very much, Mr. President. We appreciate -- this community filled and bursting with voluntarism -- before you go, I want to give you two gifts. And the first -- Mooresville is the home of the Indiana State flag. And Mooresville goes back to 1824. And Paul Hadley designed this flag, and we would like to give this to you on behalf of visiting Mooresville as the home of the State flag.
The President. Well, thank you.
Q. And, secondly, this is a gift. And I think probably I can probably begin by saying that on behalf of the 8 million new jobs -- this is made by the 35 people that are in new jobs created because of Indiana Uniform. They wanted to give you a work shirt -- [laughter] -- which is a symbol of industry. [Laughter] And on the back, we want to tell you about your tax plan.
The President. "America's Tax Plan of the Future. Go for it.'' [Laughter]
Q. Thank you, sir.
The President. Thank you. Thank you all very much. And I see I have a pin here that was also given to me. It's of your flag.
Q. Yes, thank you.
The President. And before I get to that national convention of the Jaycees that I'm going to speak to now in Indianapolis, I think I'll put this on so that they'll know where we are. [Laughter]
I thank you all very much. Are we supposed to just get on our way now?
Q. Yes, sir.
The President. Well, this is a case of just eat and run.
Reporter. Mr. President -- --
Q. Mr. President, there are two people being held hostage from Indiana. Can you report any progress since last night to the people of this State and the rest of the country?
The President. Not since last night, no. There have been few if any changes. There have been some reports, unconfirmed as yet, to the fact that something to do with how the hijackers got on the plane, and we haven't been able to confirm those yet.
We also know -- from one strange interview that was done this morning that was allowed by the hijackers -- that the answer to who is still in the plane is the crew -- the three-member crew is still on the plane, and the captain was allowed to do an interview through the pilot's window this morning.
Q. Is Nabih Berri still in control of these people? Does he still have them?
The President. Yes. And we're doing -- as I said last night, there are things I just can't talk about. We're doing everything we can -- --
Q. Mr. President -- --
The President. -- -- to put the pressure on to bring those people home safely.
Q. Does the Red Cross have any role?
The President. I -- --
Q. -- -- international organization like that have any role in something like this?
The President. Again, Sam [Sam Donaldson, ABC News], this is one that I can't -- I just won't speak to, and I can't speak to and -- anymore than I would speak of others that could or could not be involved in trying to help us in this.
To the families of those here from your own State, I think we all are praying -- that's all -- I've been praying ceaselessly for them and for their safety.
Q. Will you meet -- [inaudible] -- Mr. President?
The President. I don't know whether I'll have an opportunity because I'm due back in Washington this afternoon.
Q. We couldn't hear you.
Q. Can't you?
Q. What did you say?
Q. Thank you, Mr. President.
The President. They turned out the lights. That tells me I can't talk anymore.
Q. Thank you, sir.
Note: The President spoke at 12:37 p.m. in the meeting room at Mac's Family Restaurant.