June 5, 1985
The President. Thank you Chairman Brown, Governor Nigh, Senator and Mrs. Nickles, Congressman Mickey Edwards, all of you. You've made me so at home, I've begun to feel like a genuine Sooner. Come to think of it, the Sooner the better.
Well, I'm proud to be in the home of your champions, the Oklahoma City 89'ers. I'm proud to stand with all of you here on the grounds of this showcase industry for American technology; here on the frontlines where America is charging forward in the battle for international competitive success.
We want to help, so, I'd like to speak about our proposal to leave more earnings in the hands of you, the people, by making our tax code more simple and fair -- the most sweeping change in our tax laws in more than 70 years. I seem to remember saying in my television speech that the power of these new incentives would send one message to an entire nation: America, go for it!
Well, within minutes of that speech, the telegrams began coming in. From North Bergen, New Jersey; Jacksonville, Florida; from Lake Oswego in Oregon -- the voice of America was coming through loud and clear: Yes, let's go for it!
And I'm ready to do all I can, but I need your help. Are you with me? Can I count on you?
The President. Thank you. We call our proposal America's tax plan because it means fairness for taxpayers and prosperity for our nation.
On the business side, the present tax code has a top corporate tax rate of 46 percent. That's too high. But it also provides loopholes that are big enough for a 747 to slide through. Well, you know, in recent years some of our biggest corporations paid no taxes whatsoever, while everyday working people have been taxed up to their eyeballs.
The President. Well, I have a feeling you agree with me that enough is enough, and those days are over. From now on, all will pay their fair share.
Our tax plan would ensure that all corporations that earn sufficient income pay a minimum tax. We would also clear the way for more jobs, new products, and technologies by reducing the corporate tax rate from 46 percent to 33 percent. We would cut the maximum tax on capital gains from 20 percent to 17\1/2\ percent, because when we cut capital gains in 1978 and again in 1981, venture capital increased a hundredfold, producing new jobs, higher incomes, and more and more opportunities for Americans.
Now, good as that is, it still isn't good enough. Just like your company shot ahead of the pack, we won't be satisfied until the United States of America can outproduce, outcompete, and outsell anybody anywhere in the world.
Now, I'm delighted to see so many families here today, because when it comes to the income tax you pay, our plan represents the most important profamily proposal in postwar history. We would replace the present system of 14 different brackets with a simple 3-bracket system that will allow you to keep more of each additional dollar you earn. Right now, individual tax rates go all the way up to 50 percent. And you know what that means when you work overtime, right? Yes, it's like Uncle Sam holding a giant stop sign, putting the brakes on your initiative and on progress.
Well, under America's tax plan, the three new rates would be 15, 25, and 35 percent, period. It'll give you the freedom to get ahead, to move up, to succeed. If you work overtime or get a raise, if you're promoted to a better job, if you're able to save some money and invest it, then few of those dollars -- or fewer will go to line Uncle Sam's pockets and more will end up in your wallets, where they belong.
Sixty-nine percent of all taxpayers will pay the lowest rate of 15 percent; 28 percent will pay the middle rate of 25 percent; and only 3 percent of American taxpayers will pay the 35 percent top rate. And we're going to make the tax system so simple, so straightforward that at least half of all Americans, if they choose, won't even have to fill out a tax form.
That sounds pretty good to me, and I think you've made it evident it sounds pretty good to you, too.
There's more help on the way for families here in Oklahoma City and throughout America. To give your families the tax relief they deserve, we intend to raise the standard deduction for joint returns to $4,000. We would nearly double the personal exemption for every taxpayer and dependent to $2,000. And we would do this right away on January 1st, 1986.
Now, just in case you couldn't hear me all the way in the back there, I'm going to say it again. We intend to nearly double your personal exemption all the way up to $2,000 effective next year. I said that again; I know you heard me. I said it because I just like saying it. And that $2,000 would be indexed to protect against inflation.
We want to help your family save by expanding the limits also for individual retirement accounts, the things we call IRA's. Our present tax system limits IRA's to $2,250 when one spouse works in the home. You know, that means you can put the money in a retirement account, and you don't have to pay tax on it. I don't think this makes any sense to you, and we didn't think it makes any sense. We happen to think that the homemakers should have the same rights to IRA's as wage earners. After all, our homemakers produce goods and services that, even in strictly economic terms, are invaluable. And by nurturing our children, caring for our ill, and looking after our elderly, homemakers give America its strength and heart.
Under our proposal, husbands and wives will have the same access to IRA accounts, and we'll put this change into effect by raising the IRA per household limit from $2,250 a year up to $4,000 for every household.
Now, as we put more resources into your hands, we intend to close the loopholes that benefit the few at the expense of the many. It's about time that we do away with tax breaks for windmills and so-called educational cruises on oceanliners and tax dodges like Cayman Island trusts. It's about time we pulled our money out of foreign tax havens and put it back into investments for you and the future of America.
Now, deductions -- --
Audience member. We love you, Reagan!
The President. Thank you. Deductions for State and local taxes will also be dropped. Two-thirds of Americans don't even itemize, so they receive no benefit from the State and local tax deduction. Yet it is this majority that is now subsidizing a handful of the high-tax States.
My friends, some State governments outside Oklahoma have not yet learned to say no to special interest groups and higher taxes. I just don't believe the good people of Oklahoma or other low-tax States like Texas, Montana, or New Hampshire should be forced to pay for their lack of resolve. Do you?
The President. Now, every State has its right to manage its own affairs. But they do not have the right to make all of you carry the burden of their decisions. They do not have the right to make you pay the freight. We could, however, suggest another option to them -- restrain spending and go for growth by enacting tax cuts of your own.
And as we eliminate some deductions for a favored few, we're going to keep others that are important to all of you. The home mortgage interest deduction, for example, reflects America's historic commitment to the value of home ownership. For principal homes, it's a deduction that we intend to keep. You'll also be able to deduct up to $5,000 in other interest payments that you may make, which could be used for a second residence, if you so chose. Those military allowances and veterans' disability payments that are exempt from Federal tax will remain so. American veterans have paid their dues.
And I think you can begin to see how much easier our new tax plan will make it for families, here in Oklahoma City and across the country, to make ends meet. Consider an Oklahoma family of four struggling near the poverty level with an income of $12,000. By raising the level at which people begin to pay taxes, by doubling the personal exemption, and increasing the standard deduction, our plan would ensure that the family would pay no income tax at all on those earnings -- none.
Or consider a family of six, in which the wage earner works right here at your AT&T plant. Say he earns an income of $26,000 a year. By taking advantage of our proposal, including the new IRA provisions, that Oklahoma City working family could reduce its taxable income to only $6,000. They would pay 15 percent on that $6,000, which is just $900, which would mean an effective tax rate on their total income of less than 3\1/2\ percent.
Now, all the way up and down the income scale, American families would have more resources to devote to their children, to pay for your homes, to put away for retirement, and perhaps here in Oklahoma to buy a boat to use on Grand Lake or Lake Eufaula.
What we're talking about is revolutionary change -- a plan that is progrowth, profairness, profamily, and profuture. This is your plan, and you can make it happen this year if you'll just tell those in Washington to get on board. And if they refuse, please tell them something else -- tell them to stand aside and get out of the way.
You know, sometimes these days -- I know you've heard it, I have -- people, you read here and there, they say we have no more heroes. Well, they just haven't looked in their own neighborhoods.
Audience member. Bless you, Ronnie!
The President. We see heroes every day. They're the ones getting up every morning, they get the kids off to school, go to work 5 days a week -- many right here in the Oklahoma City Works -- support our churches and schools. On weekends, they spend extra time with the kids and teach them the enduring values of work, faith, freedom, and love.
And for too long, our tax code has discouraged us, not helped us. It's undermined work and cut into savings. Its unfairness has made our people sick at heart. The time's come for a second American revolution, a revolution in the name of our families and of you, the true American heroes. We can do it, and with your help, we will do it this year.
You know, I just have to interject something here. Back when I was Governor of California and we had a big surplus one year. And my finance director wanted to know what plan did I have for spending that. And I said, ``I've got a plan. Let's give it back.'' It amounted to $850 million. And we figured out you could just give that back to the people by way of a reduction in their income tax for that year; we'd make it up with the surplus.
But to tell you what happens to some people if they're around government too long -- after I made the announcement we were going to do this, one State senator stomped into my office one day and said, ``I consider that an unnecessary expenditure of public funds.'' [Laughter] He'd forgotten where that money comes from. [Laughter] You haven't.
Well, I've been honored to join you and your families in Oklahoma as you celebrate this 25th anniversary, your silver anniversary of the dedication of the AT&T Oklahoma City Works. You've made me feel very welcome, and I shall always be grateful. I have to leave now, but before I do, there's just one more thing I want to say and that is: America, let's go for it!
And then I'm going to just tell you a little thing that -- I hope I have not violated a lesson -- that I learned here in Oklahoma from an Oklahoman, the Reverend Bill Alexander -- God rest his soul.
Bill Alexander heard me make a speech, and he then told me the story of his first sermon. And I always figured it was a connection between my speech and his story. He said that he worked for weeks on that sermon. And the first sermon he was to preach, he'd been asked to preach at a little country church out there in the countryside. And he went out for an evening service, stood up on the pulpit, and the church was empty except for one lone little man sitting out there.
Well, Bill went down, and he said, ``My friend, I'm just a young preacher getting started, and you seem to be the only member of the congregation that showed up. Should I go through with it?'' The fellow said, ``Well, I wouldn't know about that sort of thing. I'm a little old cowpoke out here in Oklahoma. But I do know this: If I loaded up a truckload of hay, took it out in the prairie and only one cow showed up, I'd feed her.'' [Laughter]
Well, Bill told me he figured that as a cue and got back up on the pulpit; and an hour and a half later said, ``Amen.'' [Laughter] Went down, and he said, ``My friend, you seem to have stuck with me. And like I told you, I'm a young preacher getting started -- what did you think?'' ``Well,'' he said, ``like I told you, I don't know about that sort of thing. But I do know this: If I loaded up a truckload of hay, took it out in the prairie, and only one cow showed up, I sure wouldn't give her the whole load.'' [Laughter]
So, I'll just thank you all -- hope I haven't given you the whole load. Thank you, and God bless Oklahoma.
Note: The President spoke to plant employees and their families at 12:19 p.m. He was introduced by Charles L. Brown, chairman of the board of AT&T. Following his remarks, the President toured the automated computer division of the plant.