October 1, 1985
Thank you, and good afternoon, and welcome to the White House. It's an honor to be able to greet so many leaders of American business. You provide our nation with jobs, direct the creation of much of our wealth, and oversee the development of innovations which keep our economy vibrant. Now, you've come together to perform a further service to our nation by supporting America's fair share tax plan.
Permit me to congratulate you, first of all, for taking out that full-page newspaper ad last week. Believe me, it's not often that I get so much pleasure from opening the Washington Post. [Laughter] Your efforts on behalf of our tax reform plan represent an important contribution to the national debate. Many already understand that our plan will lower Federal income taxes for most individuals, but there has been confusion -- some of it sown intentionally -- over just what our plan would mean to American business. Well, permit me to set the record straight.
For small business, our plan will represent a substantial tax break. Unincorporated small businesses, as you know, are taxed according to the personal incomes of their owners. As our plan reduces personal income tax rates for most individuals, therefore, it will be doing the same for many unincorporated small businesses. The top individual rate alone will come down from 50 to just 35 percent. Incorporated small businesses will receive graduated rates of 15, 18, 25, and 33 percent -- a measure that will prove of particular benefit to businesses that are just getting started. This tax relief will benefit our entire economy as small businesses multiply and grow. From late 1982 to late 1984, industries in which small businesses predominated created new jobs at the rate of more than 11 percent. Under our progrowth plan, new jobs could be created even more quickly.
For big business, America's tax plan will mean a lower maximum corporate tax rate -- down from 46 to 33 percent. Countless provisions for special treatment will be reduced or eliminated. Compare this to the present system. The corporate tax structure today represents a vast maze of deductions, credits, and allowances for those industries and corporations who happen to be favored by Capitol Hill. It encourages competition of the worst kind, not to produce better products at lower prices, but to assemble ever bigger, more clever terms of lobbyists -- or teams of lobbyists, I should say, or to hire lawyers more skilled in taking advantage of tax code ambiguities. It all amounts to a so-called industrial policy -- that's a fancy name for Washington using the tax code to tell you how to run your business.
Every man and woman in this room must know a gifted fellow worker whose career has been spent entirely on tax policy or political calculations. Think of that person as I assert that in making taxes simpler and lower we'll be engaging in a great act of liberation, and the countless individuals who now waste their talents on tax considerations will be set free -- free to participate in the ennobling work of creating new goods, services, and techniques. My friends, isn't it time that we let American business get back down to business?
For capital formation, our plan envisions a cut in the top rate on capital gains to just 17\1/2\ percent. This measure is founded on clear-cut, recent experience. During the seventies, you remember that capital formation suffered. High rates on capital gains combined with raging inflation nearly wiped out sources of venture capital and turned many of our best entrepreneurs into tax refugees. One story concerns Gene Amdahl, the inventor of what many consider the most successsful computer ever built. Back in the seventies he decided to start his own company. He searched America for capital; he couldn't find enough. In the end he was forced to go to a large high-technology firm in Japan. They gave him capital -- in return for the rights to his ideas.
And then in 1978 taxes on capital gains were cut, and in 1981 we cut them again. The number of dollars committed to venture capital has exploded, from just $39 million available in 1977 has grown to more than $4 billion last year. Today entrepreneurs like Gene Amdahl are able to get the capital they need here at home. Indeed, former Massachusetts Senator Paul Tsongas said of the 1978 cut in the capital gains tax rate -- and listen carefully to these words of his: ``That bill, which I did not support, did more for the economy of my State than anything I did as a Congressman.'' When we cut the tax on capital gains again this year, capital formation will climb still higher. Perhaps the most significant aspect of our plan is that it will be good for business, employees and customers, and the American people.
And I have already mentioned that we'll lower the rates for most individuals. In addition, we'll increase to $4,000 the standard deduction for married couples filing jointly, and nearly double the personal exemption from just over $1,000 all the way to $2,000. The American people will have more money in their pockets, more with which to purchase your goods, more to save, and more to invest. History is clear: When we pit industry against industry in a costly combat for special tax treatment, when we diminish disposable income by shifting the tax burden onto individuals and families, then we choke off the sources of economic growth and innovation. America's tax plan will do the reverse. It will promote fairness by making certain that everyone -- corporations and individuals alike -- pays his fair share. It'll increase disposable income and foster capital formation. It will, I'm convinced, inaugurate a new era of economic opportunity and growth.
Recently, the Council of Economic Advisers completed a study of our proposal's long-term economic impact. Using conservative estimates, the Council found that America's tax plan would increase gross national product by 2\1/2\ to 3.2 percent over the next 10 years, and that's the equivalent of providing 11 years of growth in just a decade. That translates into the equivalent of almost 4 million additional new jobs over the next 10 years and from $600 to $900 a year in additional income for every American household. My friends, I think that's growth of historic proportions. Needless to say, these growth estimates are based on America's tax plan, and I intend to fight for our plan: a top corporate rate of 33 percent; a top capital gains rate of 17\1/2\ percent; 15, 25, 35 percent rates for individuals; a standard deduction of $4,000; and a nearly doubled personal exemption of $2,000.
To those who say that we can't get tax reform passed this year, I have a simple answer. The word I'd like to use was a favorite of Harry Truman's, and Bess didn't like it much -- [laughter] -- and I'm afraid Nancy doesn't approve, either. [Laughter] And since I can't think of an acceptable substitute word anywhere as eloquent as Harry's, I'll just use more words and say, yes, it can be passed this year if all of us do what we know is the statesmanlike thing to do and quit playing political games.
Tax reform is among the most pressing issues facing the country. There can be no greater demand upon the time and attention of the Congress. For delay in enacting it, there can be no excuse. In the words of Congressman Rostenkowski: ``To those who are preparing to stand against the change, I have a warning,'' he said. ``Don't underestimate the public. Demand for reform is growing.'' I've kind of guessed that myself. I've gone out, as you know, and a few places -- and we'll be doing it again this week to talk about this to crowds. And when you go into a town of 14,000 for an outdoor rally and see more than 20,000 people standing in the hot sun and had been there for a couple of hours waiting, and they had made great banners hailing the tax reform, and you're applauded on just about everything that you say about it, I think that Rostenkowski is right: The public is further along on this than some of the boys on the Hill are giving them credit for.
Well, permit me one final thought. The practice of business is, in large measure, a moral endeavor; a practice in which men and women give of themselves, their strength, their intelligence, and imagination to unlock the mysteries of the material world on behalf of their fellow man. To inhibit this process through an oppressive system of taxation is, in a fundamental sense, to inhibit human development. What we're dealing with in the matter of tax reform is not there for a mere collection of facts and figures, but the liberation of the human spirit.
And speaking about the opportunities created by recent tax cuts, George Gilder, author of the ``Spirit of Enterprise,'' has stated, and I'll read his words: "Opportunities summon initiatives. Initiatives develop character and a sense of responsibility, a feeling of optimism. The future looks more open and promising to our young people than it did before, for the simple reason that it is more open and promising. We've had a doubling of business starts in the last seven years. There has been a riot of new technologies; there has been a convergence of policy and technology that has changed the spirit of America.'' My friends, by enacting this historic tax reform, we can make America's spirit brighter still. And with your help, I'm confident we will.
Thank you for what you're doing. Thank you for being here, and God bless you. Thank you very much. Now, Don says I got to get back to work.
Note: The President spoke at 1:30 p.m. in the East Room at the White House. In his closing remarks, the President referred to Donald T. Regan, Assistant to the President and Chief of Staff.