July 10, 1986

Thank you all very much, and, Jeremiah, thank you very much for those very generous words. Mayor Register, Chairman Entz, and all of you, you know, I just can't tell you how -- from getting off the plane on -- what this has meant. I've always wondered why Genesis says, ``Let us go to Dothan.'' [Applause] With such a welcome, I'm getting the idea. And permit me to thank all those who helped or prepared these lunches. If there's one thing better than southern hospitality, it's southern cooking. [Applause] I see you agree. You're going to have to forgive me, though, but all that fried chicken put me in mind of a story. Lots of things put me in mind of a story -- at every opportunity. [Laughter] Now, I've told this one. Maybe you've heard me tell this one before. But if so, just forgive me. Remember that when you pass 40 the tendency grows to tell stories over and over again. [Laughter]

This happens to be about a fellow that was driving down the highway and happened to glance out and notice that running alongside of him, keeping pace with the automobile, was a chicken. And he couldn't believe it. So he stepped it up a little bit, and the chicken stepped it up a little bit. Finally, he pushed the gas down, and then the chicken just stretched out his neck and left him behind, crossed the road and went down a lane. He slammed on the brakes, turned, and went down that lane. His curiosity had to be answered. And he pulled up in a barnyard, and there was a farmer standing there. And he said, ``Did you see a chicken go by here?'' And the farmer says, ``Yes, it's one of mine.'' ``Well,'' he said, ``am I crazy or -- it seemed to me that chicken had three legs.'' He says, ``Yep. I breed them and raise them that way.'' ``Well, why?'' ``Well,'' he said, ``Ma liked the drumstick, and I liked the drumstick. And then along come Junior, and he liked the drumstick. And we got tired of fightin' over it. So, I raise them with three legs.'' [Laughter] And the fellow, for want of something to say, says, ``Well, how do they taste?'' He says, ``We don't know. We haven't been able to catch one yet.'' [Laughter]

But it is an honor to be here today. And I did come down on very serious business: to tell you about an historic issue in Washington and to ask for your help. But first I have to thank three Alabama gentlemen who are already rendering able assistance. First, an outstanding Congressman and the ranking Republican on the House Armed Services Committee, Bill Dickinson. [Applause] No Member of the House has done more in rebuilding our nation's defenses than you have, Bill. And I'd like -- well, I have asked you to stand up, and I think they've all shown you their appreciation. Next, there's a fine Member of the United States Senate, a young fellow named Howell Heflin. Now, I know Howell's a Democrat, and I want to thank you for showing that, on issues like tax reform and defense, there's no such thing as good politicians, just good Americans. Howell, will you stand up? [Applause] Howell knows I used to be a Democrat myself. [Laughter]

Well, then there is someone who has already been up here -- Senator Jeremiah Denton. Jeremiah and I have shared many a platform, and I just have to tell you it always does something to stand here with a hero. Nancy and I were back in Sacramento the day a plane brought you back from those nearly 8 years of torture in a North Vietnam prison camp. And like millions of Americans, we watched that homecoming, that moment on television, and will never forget, as many Americans won't, you walking to that microphone and then saying those three simple words that said it all: ``God bless America.'' [Applause] For bravery, for keeping faith, for love of country -- I think you've just heard -- we all thank you. And now that you're in the Senate, I want all the good people here in Dothan to know that courage and patriotism continue to distinguish all that you do. Indeed, in the years since we were both first elected, you've become one of the most persuasive leaders on Capitol Hill and an effective spokesman for the great State of Alabama. You've led the way in rebuilding America's defenses, spoken out for godliness and decency in our national life, and stood up again and again for freedom around the world. And this is a good place for me to express my gratitude and to say that as far as I'm concerned, with Howell Heflin and Jeremiah Denton in the Senate, that people have good reason to be proud.

Now, my friends, I told you that we had important business to discuss, but permit just one more digression, something I have to tell you because I came from part of the heartland of America myself. I want you all to know what a pleasure it is -- and it was -- to board Air Force One, watch Washington slip away into the distance, and then head south, over the Great Smokies of North Carolina and Tennessee, over the red clay of Georgia, south to come at last to the wire grass country of Alabama and the good city of Dothan. It reminded me how important it is for a President to put some distance between himself and Washington every so often, to leave the special interests and the lobbyists behind and get out among the people. I guess what I'm trying to say is that Dothan has given me a gift today, the gift of returning to the real America, and for that I thank you.

And now let's get down to straight talk. There's an important issue up in Washington that's about to be decided, and as I said before, I'm here today because I need your help. And that issue is tax reform. Big government and the special interests are on one side, and you and I are on the other. It's been that way since the start. And since it's a good, old-fashioned, down-home, 6-year scrap with the special interests we're talking about, well, we'll get at it. The first round in this battle took place when I ran for office in 1980. Back then the American economy was in the worst mess since the Depression. Government was everywhere, running up taxes, causing inflation, raising interest rates, and taking bigger and bigger shares of our earnings. And to get big government off our backs and out of our pockets, during the campaign of 1980 I proposed a tax cut. The special interests -- all those whose way of life depended upon keeping government fat and wasteful -- said no. The people knew better. When they went to the ballot boxes, they said yes.

Well, when we took office in 1981, we enacted an across-the-board, personal income tax cut of nearly 25 percent. We also indexed tax brackets, making it impossible for inflation to push you into higher tax brackets, as it had been doing for the many years that inflation was running rampant. And again the special interests said no, claiming our plan would lead to economic ruin. And then all the opponents of the plan called it Reaganomics. And again the people said yes. And what's happened? Inflation and interest rates have dropped. Inflation alone has fallen from over 12 percent to under 2 percent for the last 12 months, and actually has been less than zero for the last few months. We've seen 3\1/2\ years of economic growth and the creation of more than 10 million new jobs -- more new jobs than Western Europe and Japan put together have created in the past 10 years. And thanks in large measure to our decontrol of oil, energy prices have fallen, including the price that you pay for gas. Isn't it good to pull up at the station today and watch the gallons on the pump add up faster than the dollars? Of course, after all these things happened, they stopped calling it Reaganomics. I'm aware of that.

You know, I have to interject something here. I come honestly by my feeling about taxes. As Governor of California, I inherited a situation with a great deficit and some problems. And we had to turn to taxes, because under the constitution there you can't come to the end of the fiscal year with a deficit. Such should happen to the Federal Government. Because you come into office there in the middle of the fiscal year, so I only had 6 months to clean things up, and, therefore, we had to turn to taxes. Well, very shortly my finance director came to me and said, ``We're going to have a surplus this year. And since you haven't been able to do some of the things you might have wanted to do because of the situation, maybe there's a program that you'd like to propose to use up this money.'' And I said, ``I do have one in mind. Let's give it back.'' Well, he said, ``It's never been done.'' And I said, ``Well, you never had an actor up here before either.'' [Laughter] Well, we gave it back. But I just wanted to tell you I'm prepared, also, for the kind of opposition we're getting to this tax reform now. Because a very prominent member of the government came in to see me. He stalked into my office, and he declared, ``Giving that money back is an unnecessary expenditure of public funds.'' [Laughter] Well, I think we ought to all try to remember where government's money comes from in the first place.

The last stage of the tax reform fight began more than a year ago when we proposed our new reform, one that would simplify the entire tax system, eliminate loopholes and tax shelters, lower most Americans tax rates even further, and make the whole system more fair. Some claimed the American people didn't care about tax reform any more. But that's not what I found when I took our tax reform campaign to places like Athens, Tennessee; Oshkosh, Wisconsin; and Harry Truman's hometown of Independence, Missouri. And that's not what I'm finding here today in Dothan, Alabama.

Our proposal went first to the House, and the special interests tried to kill it. And when they couldn't do that, they tried to wound it. And when they couldn't do that, they said it was bad for the country. But in the end, their fancy briefing papers and expense-account lunches were no match for the will of the people. The House, under the leadership of Dan Rostenkowski, passed a version of our proposal -- not completely to our liking, but nevertheless one that kept tax reform moving. Special interests, zero; America, one. Next, tax reform went to the Senate, and again the special interests fought it. And they did a pretty good job, and I have to admit there were moments there when even I had to wonder. But a bipartisan coalition of Senators that included present company and Finance Committee Chairman Packwood and Senators Long and Chafee and Danforth and Wallop and Moynihan and Bradley had the courage to lead a return to true reform. And led by Majority Leader Bob Dole, the Senate passed tax reform by the historic margin of 97 to 3. Soon after, a headline in the Washington Post read, ``The Impossible Became Inevitable.'' Special interests, zero; America, two.

And now, as Jeremiah and Howell will tell you, the version of tax reform approved by the Senate deserves special attention for the simple reason that it's especially good. Not good for Washington lobbyists or special interests, but good for you. Listen for a moment to a few of the facts. The tax reform bill the Senate approved would eliminate the complicated system of 14 tax brackets and replace it with just 2 at 15 and 27 percent. Now, sometimes you may be confused because you've heard it referred to as 15 tax brackets and that this reform would have 3. Well, in one way that's true. If you count 0 -- 0 and 15 and 27. And under this new and simpler tax, the average tax burden on individuals would be cut by some 6.4 percent, over 6 percent less a year -- that works out to some $215 in savings for the average taxpayer. The Senate-approved plan represents an improvement over current law for agriculture, too. It will provide more equal tax treatment for income earned in various kinds of farm activities. And it will sharply limit opportunities for people who make their money someplace else to take advantage of real farmers by using agriculture as a tax dodge. Isn't it time that we gave farming back to farmers?

And overall, it's estimated that under the Senate-approved tax reform bill, some two-thirds of all individual taxpayers will either get an income tax cut or remain off the tax rolls completely. Corporate tax brackets would be straightened out and the top corporate rate brought down to 33 percent so the playing field for business would be made more level and fair. And tax reform would represent perhaps the biggest antipoverty program in our history, taking some 6 million Americans off the tax rolls and enabling a family of four making $15,000 or less to pay no Federal income taxes whatsoever -- none. That's that zero bracket.

Now, as I've told you, when the special interests up in Washington hear all this good news, they say no. But the American people, my friends, the people say yes and hot darn! [Laughter] You realize I'm only allowed to say ``darn.'' [Laughter] But you know what I mean. [Laughter]

Now there's just one more round left in the fight, just one more chance for the special interests to score before we make it an even 3 to nothing and declare America the winner. That chance will be in the conference committee, where Members of the House and Senate must meet to iron out the differences between the bills that each chamber has passed. Before the special interests start in on the members of the conference -- and it indeed could begin meeting as early as this coming week -- let me state for you and the record some of the elements that I believe any final compromise must contain. Believe me, after coming through so many rounds, beginning all the way back in 1980, I'm not about to let up now.

First, any bill agreed upon in conference must hold the tax rates down. There's no doubt about it, lowering rates for both individuals and corporations represents the most important aspect of tax reform. It encourages growth. It allows simplification. And it promotes fairness. Let there be any significant departure from the two low individual rates of 15 and 27 percent and the top corporate rate of 33 percent that the Senate has already approved, and somebody's going to have to do a lot of explaining. Next, I urge the conference to retain provisions that would remove 6 million lower income Americans from the Federal income tax rolls altogether. There's no reason to force the working poor, people who are already struggling, to turn over a share of their earnings to the government. And to help families and individuals alike, I hope to see the conference increase the personal exemption to $2,000 except for the very richest taxpayers. This is vital. It's also important for the conference to preserve the taxpayers' ability to invest in IRA's -- especially for taxpayers who don't participate in a pension plan -- then reap the benefits of tax-deferred growth.

For American business, I hope to see the conference provide incentives for capital formation, incentives to foster truly productive investment. At the same time, the final bill must not hit the distressed sectors of our economy, sectors like farming and energy. Americans in these fields already have tough enough times as a result of forces beyond their control. And finally, I urge the conference to retain as an overriding goal the replacement of an inequitable tax system with one that's truly fair. Tax dodges have been going on long enough. The conference must grasp this opportunity to eliminate tax dodges and impose a minimum tax so that people and corporations who should pay do pay.

And what it comes down to in unvarnished language is this: Any bill I sign is going to have to promote strong economic growth with more jobs and incentives for all; promote productivity, investment, and international competitiveness in American business; and help the middle class, giving those people who get up and go to work in the morning and who support their churches and charities in the community and make this system work -- give them a tax cut by making those who have found ways to avoid most or all of their taxes now pay their fair share. You know, my friends, in the past 5\1/2\ years, the people have defeated the special interests again and again. We've gone from a tax system that smothered initiatives to one that has provided new incentives for hard work, investment, and growth; from an economy that was creating virtually no new jobs to one that's creating about a quarter of a million new jobs a month; from a sense of malaise and powerlessness to a sense of confidence in our nation, ourselves, and our future.

And today we have the opportunity to carry this peaceful revolution through to its conclusion: to lower taxes still further for most individuals, to help American business, and to make our tax code fairer and simpler for all. We have the opportunity, in other words, to reassert for ourselves, our children, and our grandchildren what is perhaps the fundamental principle of American life: that here government is the servant, not the master; that here it is government that acts at the convenience of the people.

Last weekend, the Fourth of July, meant a great deal to me and I know to all of us. ``For love of liberty,'' I said, in New York Harbor, ``our forebears fought a war for independence. For love of liberty, those who came before us tamed a vast wilderness. For love of liberty, Americans championed and still champion the cause of human freedom in far-off lands.'' Tax reform may at first seem less dramatic, less inspiring, than the battle for independence or the settling of our continent. But in truth, it belongs on the same plane as those great efforts. For it involves nothing less than the reassertion of the will of the people, the reassertion, as I've said, of the people's interest against the special interests. And, my friends, for love of liberty, we must see it accomplished. Can I count on your help? [Applause]

Now, I just mentioned simplifying the tax code a couple of times. But I can't quit without just giving you a little example. We all know when we sit down there before April 15th what we're up against. Lately I've had to have somebody else make out my tax bill. And you know something? Even after it's made out I can't understand it. [Laughter] The whole income tax started in the Constitution with 16 words -- in the amendment. Now it takes a 57-foot-long shelf to hold all the tax books that have to do with all the rules and regulations of the income tax. So, before concluding, I just wanted to speak to you about something from the International -- or the Internal Revenue Code. It is the last sentence of section 509A of the code and it reads: ``For purposes of paragraph 3, an organization described in paragraph 2 shall be deemed to include an organization described in section 501C - 4, 5, or 6, which would be described in paragraph 2 if it were an organization described in section 501C - 3.'' And that's just one sentence out of those 57 feet of books. [Laughter]

Well, it's time for me to head back to Washington and get to work, but before we leave I want to show you something that Jeremiah gave me the last time that I visited your good State. He -- you can read it -- he told me that it would help cut taxes down to size. And here it is: our original tax ax. [Laughter] Now, I've been sharpening this thing. Now let's get back to Washington and put it to use.

Thank you, and God bless you all.

Note: The President spoke at 12:27 p.m. at a luncheon at the Dothan Civic Center. He was introduced by Senator Jeremiah A. Denton of Alabama. In his opening remarks, the President referred to Larry Register, mayor of Dothan; and William Entz, chairman of the Dothan-Houston County Chamber of Commerce.