Remarks to Employees of the Department of the Treasury
February 5, 1986
It's great to be here with you. Jim, it feels like old times except I keep thinking I should have brought something to give to somebody. [Laughter] And for you, Don, it must be like coming home again. And you've already -- it's kind of been touched upon here that -- speaking of old times, you may have heard that tomorrow is my birthday. Now, you know about that. I prefer to think of it as the 36th anniversary of my 39th. [Laughter] A few more of these and I'll be just about due for a midlife crisis. [Laughter] In fact, I'm thinking about a career change. [Laughter] Drop this political business and see if I can't do something different like radio or the movies. [Laughter] Maybe I'll give politics another 3 years.
Now, the first thing I want to do today is to thank you for all the time and effort that you've put into reforming our nation's tax code. The work has been complicated and hard and seemingly endless; some might even say you've been overtaxed. But unfortunately, we didn't get tax reform in time for this April 15th, but I am confident that the next time Americans have to sit down and pay their taxes, they're going to see a dramatic change for the better.
We'll still be needing your help in the months ahead keeping tax reform on track. As I outlined last night in the State of the Union, we'll be looking for several specific improvements to ensure that the final bill is profairness, profamily, and profuture. We'll want to see return of the full $2,000 personal exemption for itemizers as well as nonitemizers -- at least for those individuals in the lower and the middle-income brackets. Young families starting out in new homes beset with mortgage payments and all the costs of raising children urgently need the full exemption, and we're going to make sure they get it. Decades of inflation seriously eroded the value of the personal exemption and thrust an increasing share of the tax burden onto the shoulders of families with children. You might say that tax policy has made raising a family uneconomical, discouraging couples from having children or, if they do, forcing spouses, who might otherwise wish to stay at home, into the work force simply to maintain their standard of living.
We think it's about time the Federal Government stopped putting the squeeze on families. You know, if anyone gives you an argument on that $2,000 -- that's, you know, up from $600 to $2,000 -- it's kind of interesting to note how the Government has been dishonestly getting tax increases without doing anything openly, because if we really made the personal exemption today equal in purchasing power to when it was 600, the exemption would be $2,700. We're not even catching up with inflation in what we're asking. As far as the top rate is concerned, in our minds 35 percent is the right number -- just exactly half of the 70 percent we started with 5 years ago.
A final bill must also include basic tax incentives for American industry. And effective dates should be ironed out so that investment decisions aren't disrupted or delayed due to uncertainty. A minimum tax should make sure no corporations or individuals avoid paying their fair share. And finally, tax brackets must be fully consistent with our desire to reduce taxes for middle-income working Americans. True tax reform must give real tax relief to low-wage earners and the middle class. And we want to give all Americans a leg up on the ladder of success. We should all reflect on the dramatic, even revolutionary, change that tax reform represents. A consensus is forming in both parties that we must lower marginal tax rates in order to increase incentives and spur economic growth. Nothing succeeds like success, of course. And no one can any longer deny the success of marginal tax rate cuts and incentives in revitalizing the American economy and giving us 37 months of growth with low inflation.
One of Secretary Baker's great contributions is his emphasis on the global economy. He realizes that America's economy can't continue to race forward if our friends and allies are lagging behind. Many of the trade problems that we're experiencing today are caused by the imbalance between our dynamic low-tax economy and the sluggish high-tax economies of so many of our trading partners. Trade, the lifeblood of the world economy, is also hampered by wild and unpredictable fluctuations in exchange rates. We must work to promote the expansion of world trade and growth in the global economy by strengthening economic policy coordination among our industrialized trading partners.
As I mentioned in the State of the Union, I've directed Treasury Secretary James Baker to determine if the nations of the world should convene to discuss the role and relationship of our currencies. Many developing countries with large debts are in particularly dire straits, and we in the industrial world must assist them in dealing with their difficulties. We have championed free markets at home and have observed their success here and in many developing countries. We must encourage other countries to pursue these market-oriented, progrowth policies, rather than going the route of central planning -- huge government projects and denial of property rights. In particular, we must encourage them to avoid high tax rates that only choke off incentives and slow growth. The plight of many developing countries is desperate and the call to action is urgent. So, let's begin now to spread hope and opportunity across the world by encouraging lower taxes, freer and fairer trade, and a sound monetary system.
I'm asking you to vigorously pursue implementation of our proposed program for sustained growth, to address problems of debt and declining growth in the developing countries. This program calls for increased lending by commercial banks and an expansion of loans by multinational banks conditioned on structural reforms, including tax reforms in the debtor countries. A healthy, expanding world economy is the best environment for a strong, secure, and growing America.
So, between tax reform, initiatives on the global economy, and your traditional and essential enforcement activities, you're going to have your hands full here at Treasury. Working together, we can make 1986 the year that tax rate cuts opened wide the doors of opportunity at home and our program for sustained growth helped bring jobs, growth, and hope to many in the developing world. Working together, we can make 1986 a banner year for growth, stability, and prosperity.
And, again, I just want to say, I thank you all for the help that you've given and the part that you've played in the great economic recovery that we're having and the fact that we stand virtually alone in the world in having achieved these particular results. So, thank you all, and God bless you.
Note: The President spoke at 1:11 p.m. in the Cash Room at the Department. In his opening remarks, the President referred to James A. Baker III, Secretary of the Treasury, and Donald T. Regan, Assistant to the President and Chief of Staff, both of whom had previously served in the other's position.