June 13, 1985
Thank you, Governor Tom Kean, and thank you Mayor Kinder. You know, I think New Jersey is very lucky to have Tom Kean as its Governor. He is one of the ablest State executives in the country; he happens to be one of my favorite Governors.
He calls me now and then, and I'll ask him, ``Well, Tom, what should I do about the budget?'' And he says, ``Come to New Jersey.'' And then I say ``Tom, what should I do about taxes?'' And he says, ``Come to New Jersey.'' He's a great booster of your State, and I've been here four times in the past year alone, so you can see I take his advice seriously. I'm also delighted to be here with two of our finest Members of Congress, Congressmen Dean Gallo and Matt Rinaldo.
It's great to be back in New Jersey. I've been in Hammonton, Elizabeth, Hackensack, Hoboken, and Oradell in the past 12 months, and I am very happy to meet the people of Bloomfield.
You know, I've been traveling across the country the past few weeks talking about tax reform -- why we need it, what it is, and how it will affect us all. And I brought my message here today because we cannot make a change this great without the help of all the people in America. We especially need the help of the most committed and hardest working citizens in the country, which means we need the support of the people of the Garden State.
Now occasionally, I get into a sort of a dialog with the audience when I'm speaking. It's kind of my way of gauging public opinion. I call it the Reagan poll. Well, frequently, I do it somewhere near the end of my talk, but today I'm going to do it at the beginning.
And here goes. Now, listen carefully. If you really, truly love our current Federal tax system, the one we have now that you just had to deal with a couple of months ago, how about a big cheer for it?
The President. Now, I didn't really ask for laughter, I just asked for a cheer.
Now, how about this? If you even like our current Federal income tax system, how about a big cheer?
The President. Well, not even one cheer. There must not be anyone from the IRS here.
All right now. It wasn't completely silence, but the sounds you did make was as good as silence. I think it demonstrates a fact with which we're all familiar: Our current Federal tax system is neither admired nor respected. It encourages cheating; it is inherently unjust; it has created a vast and unproductive underground economy; it is tottering on an unsound foundation; and it's time we simply tore it down and built a better one.
Our current tax system is ready for the ash heap of history. And having decided that, now comes the difficult business of creating a new tax system that is fair and easy to comprehend. A new tax system that will allow people to get ahead, that won't keep holding them down, a new tax system that will finally put the family at center stage and the special interests way high up in the back of the balcony where they belong.
Now, I believe that we have created such a system in the proposal that we put forth 2 weeks ago. I know you're familiar with the particulars. You've been reading about them in the magazines and the newspapers and listening to debates, and I hope you've had some time to sit down at the kitchen table and figure out what you would pay under our proposals. Because if you have, then, you know that our proposals will very likely speed tax relief for you and your family.
I did some research the other day, and I found that, according to the most recent statistics, the typical income for a family of four in the State of New Jersey is $36,450.
Now, what would our tax plan do for the family, and how would it affect it? To start with, under our plan the personal exemption for each taxpayer and dependent in the family is almost doubled to $2,000. So, the family will immediately deduct $8,000 from its taxable income. Then it will subtract the standard deduction -- for a joint return it's $4,000. Now, you have $12,000 that's not taxable. And let's say you decide to save for the future by investing in what we call the IRA, individual retirement account, for $2,000 of savings. That $2,000 is not taxed. And now, you're up to $14,000 on which you won't pay a penny of Federal tax.
On the remaining $22,450, you'll pay a tax rate of 15 percent, which means you pay an effective tax rate on the whole $36,450 of less than 10 percent. Now, you realize I haven't tried to estimate the other deductions such as interest on your home mortgage or charitable deductions and so forth.
But that family, that New Jersey family, will do a lot better under our system than the current one. How much better? Well, under the current system, they'd pay $4,635 a year if they just took that $14,000 deduction, not counting any others, in Federal income tax. And under our proposal, they'd pay more than $650 less.
And for the first time in years in our country, the man and woman at the head of the family will be able to work overtime or take a second job without seeing those new wages eaten up by high marginal tax rates as you go up in those 14 brackets that we presently have.
The poor will benefit from our tax proposals because most of them won't pay any Federal income tax at all. Middle-income earners will benefit from lower tax rates and the increases in the personal exemption, the standard deduction, and in the IRA's. In fact, 58 percent of all American families will pay lower taxes under our plan. Over 21 -- or another 21 percent, I should say, will probably pay the same as they pay now -- no more. And all of us will benefit from the economic growth that will follow the lowering of taxes, just as you found it brought about the lowering of taxes here in your State brought about increased economic recovery and prosperity and productivity in this State.
So, what I'm talking about is a good deal for the American people. And that's why tax reform has garnered such support across the country. And that's why my friends in the other party support it.
One of them, your senior Senator, is a pioneer of the tax reform movement. We admire Bill Bradley; we're glad he's on the team, and his leadership is indispensable to victory.
But tax reform is not without its foes. There are those who won't oppose it outright, but who'll try to nickel and dime it to death. Others will use any false argument they can, any scare tactic to cloud the truth and raise confusion.
There are those who say that our tax plan will benefit some States and hurt others. They say that when we eliminate the deduction for State and local taxes, we'll hurt the people who pay those taxes in the high-tax States. Well, again, it's simply not true.
First off, two-thirds of the people who live in such States don't itemize and don't deduct their State and local taxes to begin with. So, the current State tax deduction is of absolutely no use to two-thirds of the households in the high-tax States.
And let me add here that I don't consider New Jersey to be a high-tax State. For instance, New Yorkers have to pay top income tax rates that are more than four times as high as New Jersey's. And your Governor, Tom Kean, by the way, I happen to know he's spoken about what he's done, but I know he's trying to cut your State income taxes even further. And I'm for him.
Now, my second point: Most of the lucky one-third who do itemize will, under our plan, get a Federal tax cut to help lower their tax bill. As an example, here's a New Jersey family of four that's making almost $42,000 a year. They live in Bloomfield. They're very happy here. They love Mayor Kinder, as who doesn't. Now, this family itemizes on the deductions for a joint return from New Jersey. They take the average estimated amount. And under the current tax system, that family would pay a Federal income tax of $4,948. Under our plan, the new plan, they'll pay some $600 less. Now, that's $600 a year in savings for a family that itemizes. And I haven't even begun to calculate what they'll save on accountants and tax lawyers.
Finally, our third point: Because our tax plan will encourage economic growth, it will broaden the tax base in every city, town, and State in the country. Now, Bloomfield has a vibrant local economy. When the people of this town are allowed to keep more of their hard-earned money and are allowed to spend it, save it, and invest it; well, then the business community of Bloomfield will really bloom.
But there's a greater point, and let me put it more clearly. When you've got a tax plan that's pro-growth, pro-family, and pro-fairness, then you've got a tax plan that's pro-New Mexico, pro-New York, pro-New Jersey -- it's a tax plan that is pro-American; it's America's tax plan.
Now, we're not favoring one State over another. We're favoring every taxpayer in America by creating greater fairness, greater justice, and lower tax rates. Our tax plan will close the loopholes that are manipulated by some to avoid paying taxes. The truth is everyone should pay their fair share.
And no one, no matter how powerful or privileged, should be able to use tax shelters to keep from paying taxes when the middle class, with no place to hide and no protection from clever accountants, bear more than their share of the load.
Now, our plan will not increase the deficit nor will it be used to raise revenue. You know, some people are talking about turning tax reform into a tax increase. Well, let me tell you, anyone who tries that, I have a veto pen ready for them.
Our tax program is designed to ensure the growth of the American economy in our time and in our children's time. It's aimed at creating investment and jobs and personal wealth. We're not just talking about a better deal for now -- we're talking about the future. And we're not just predicting economic growth, we're promising it. We know it will happen.
So much is ahead of us; more important, so much is ahead for our children. You know, it's the oldest cliche, only because it's true: The fuel that has kept America going, that made every tired breadwinner get up every morning and go to work, the thing that's made every one of our families hold together and pull at the same oar, the fuel that kept all that going was the hope that the kids in their day would have it better.
It was the hope that our children would have more than we did, that they'd live richer lives in terms of experience, opportunity, and wealth. We're a nation that got up every morning for the children, and we still do. And when I talk about economic growth, I don't mean more wealth for now -- we're doing all right. I mean creating a whole world of real and tangible opportunities and possibilities for our children.
If I could jog your memory a little bit, there was a time not too long ago -- just a few years ago -- when America was being told that we were living in an age of limits; that things had changed; that we'd gone about as far as we could go, and from here on it was going to be all downhill, and we'll just have to get used to being second rate. You remember those words about a malaise that we were suffering. And America, being an open-minded and realistic country listened and pondered and considered, and then America made a decision. It told the pessimists to take a hike.
I'm not optimistic about the future of America because I have a sunny disposition. I'm not optimistic because I don't know the realities. I'm optimistic because I do know them. I'm optimistic because I have witnessed the American experience for more than seven decades, and I know that the American people can do anything.
In the past 5 years, the American people -- not the politicians, not the elites, not the heavy-browed intellectuals, but the American people -- single-handedly turned our country around. And all we in Washington did was try to get the Government out of your way.
Reforming our tax structure is the next step -- and as your Governor told you -- in the second American revolution. And I need your help. The sharks are circling our tax plan and trying to take a bite. We happen to have a foolproof shark repellent in the will of the American people. But your voice must be heard.
Can you help us? Will you help us?
The President. All right. Will you write your Representatives? You don't have to write the two here, they've already heard you. [Laughter] Write your Representatives, your Senators, and tell them how you feel. It really does mean something in Washington to hear from you -- the mail and the telegrams and the phone calls. Tell them how you feel. And that's great because without you, nothing can be accomplished; but with you, everything is possible.
And if you get pessimistic or think your contribution won't make a difference, just think of those young soldiers that you were told about of two centuries ago, who, during another revolution, trained on the Green, held together, and marched New Jersey and America into freedom.
You know, speaking of this, I just want to say one last thing, too. If you feel like adding a P.S. to your letter, I've talked about tax reform, but there's another vital thing lying before the Congress today. Add a P.S. that yes, let's go forward with that budget we've proposed that will reduce the total of government spending.
We've been spending too much for too long, and it's time to put government, the Federal Government, on a diet, just as your Governor's doing here in your own State.
Well, it's been wonderful to be here. I hate to go, but I'll be talking to Governor Kean again, which means I'll be back. So, I'll see you then. Good luck, God bless you, and by the way, I love New Jersey!
Thank you very much.
Note: The President spoke at 12:10 p.m. from the steps of the Municipal Building.