May 31, 1985
The President. Governor Thornburgh, ladies and gentlemen here on the dais, and all of you: I thank you very much. It's great to be here at the Valley Corporate Center, the workplace of the future. Here in the Route 202 corridor, America is truly on a high-tech highway, rolling full speed ahead, and there ain't no stopping us now.
Let me tell you, it's also great to leave Washington once in awhile and see what the real America is up to. I've heard that some of the advanced-technology companies up here are working on what they call very large integrated systems. Now, that's nothing new to me. Most of the time in Washington I feel like I'm working with a very large disintegrating system. [Laughter]
Although, I have to confess I'm not very up to date on all this new high-tech computer lingo. I thought hacking meant what the Congress has been trying to do lately to the defense budget. [Laughter]
But we do have a new tax plan that I think the high-techers -- in fact, all Americans will like. Last Tuesday night, I addressed the Nation on our proposal to totally revamp our nation's Rube Goldberg tax system and turn it into a model of efficiency and fairness that works for the new age of silicon chips, CAD/CAM, bioengineering, robotics, and all the other marvels of this new technological era.
We call it America's tax plan because it will mean tax relief for American families, individuals, and businesses. It'll mean less redtape and lower rates for the majority of Americans. It will not be a tax increase; it will not expand the deficit. It will increase incentives to work, save, and invest. And it will mean that American technology can shoot ahead, and it will help America outproduce and outcompete anybody, anywhere in the world.
Our tax cuts in 1981 lifted our economy out of -- you've heard the word back then -- ``malaise'' and into an almost 2\1/2\ years of growth. If those tax cuts could take a sick economy suffering from runaway inflation, skyrocketing interest rates, declining investments, sinking morale, and slumping initiative and turn it into the strongest, most dynamic and innovative economy in the world, think what America's tax plan can do today. We can build success on top of success. We can ignite the second stage of our booster rockets and blast this economy to new heights of achievement. We can do it, and we will do it.
With your help and the leadership of Pennsylvania's finest -- Governor Dick Thornburgh, Senator Arlen Specter, Congressmen Dick Schulze, Bob Walker, and Larry Coughlin, and others like Senator Heinz who aren't here today -- we're going to go the distance.
For too long our tax code has been a damper on the economy. Steeply rising tax rates punish success, while tangled and needlessly complicated rules of compliance can boobytrap any new enterprise that can't afford high-priced lawyers and tax consultants to protect itself from the tax man.
April 15th wasn't so long ago. And I'm sure many still remember that mounting feeling of frustration and resentment as you worked late into the night trying to make sense of the maze of bureaucratic rules and regulations. Nearly half of all Americans threw up their hands in dismay and went to get professional help on their taxes this year. Well, paying someone to figure out how much you owe the Government in taxes just adds insult to injury. Don't you think America's had enough?
Well, we're going to break apart the shackles and liberate America from tax bondage. We're going to dramatically simplify the whole process of paying taxes. Eventually, as many as half of you won't have to worry about the 1040 Form. In fact, you won't have to fill out a tax form at all. That's how I spell relief. [Laughter]
We're going to replace the present obstacle course of some 14 different brackets with a flatter, simpler, three-step design that will allow you to keep more of each additional dollar you earn. The present tax structure locks Americans into a future of ever-climbing tax rates. Even though our tax system is indexed for inflation, as real incomes increase the tax bite grows larger and larger. America's tax plan is a dynamic model for the future that gives Americans the freedom to get ahead, move up, and succeed. This means that 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 fewer of those dollars will go into Uncle Sam's pockets and more will end up in your wallets, where they belong.
We think that the Federal Government should get out of the business of punishing people for hard work and success with high tax rates. Instead, we want to encourage all Americans to follow their dreams, to go as far as their courage, initiative, and creativity will take them. We think that's what America is all about, and that's why we're saying: America, go for it.
Now, this -- --
Audience. [Inaudible]
The President. Hey! That's why. Well, that's where I got the idea. [Laughter]
Well, this proposal will be a first for the American family -- as I said on Tuesday, the single strongest profamily initiative in postwar history. Raising a family in this modern age isn't always easy, and the Federal Government hasn't been helping much. Since 1948 the personal exemption has been declining in value to the point where it's now only a fraction of its original worth, due to inflation. But we're going to turn that around by virtually doubling the personal exemption to a full $2,000. That's $2,000 for every taxpayer and dependent in the family. Together with our hike in the standard deduction of up to $4,000 for joint returns, our tax proposal would mean that a Pennsylvania family of four wouldn't pay a penny in Federal income taxes on the first $12,000 of income earned. And with the lower marginal rates of our new design, they'd pay only 15 cents on each dollar of taxable income from there on up to $29,000.
In helping America's families, we know that we have right on our side. Our proposal also would provide equal access to IRA's for homeowners -- or homemakers -- I'm sorry -- homemakers. And that's as much as $4,000 of tax-deductible IRA savings funds per couple each year. And we're keeping those deductions in the present code on which our families depend, such as home mortgage interest deductions on principal residences and at least $5,000 in other interest payments which could include a second residence. Deductions for charitable giving, medical bills and casualty losses, the current preferential treatment of Social Security and the exclusion of veterans' disability benefits will be maintained.
This is one tax proposal that America can be proud of. It promotes all our nation's most basic values. It's profamily and profairness, pro-opportunity, and most of all profuture. I bet a lot of people here can remember the bad old days of the seventies when punitively high tax rates on capital gains were squeezing the life out of our venture capital markets and putting the lid on innovation. Since then, two dramatic cuts in the capital gains tax have produced a renaissance of entrepreneurship and catapulted America to the cutting edge of high-tech.
Venture capital -- that's the capital that funds the new, adventurous, high-risk industries like many of these here in the Great Valley Corporate Center. It is thriving. From a disastrous low of $39 million in the depths of 1977, the total of venture capital in this country -- it exploded to $4.2 billion last year.
High-tech is spreading across the country like wildfire. Silicon Valley is being joined by Silicon Bayou in Louisiana, Silicon Mountain in Colorado and, as some have called it, the Silicon Valley of the East -- right here in the Route 202 corridor.
Well, we've got good news for our silicon cities. We're going to feed the fires of technological invention by lowering the capital gains tax once again, giving it a top rate of 17\1/2\ percent. We're going to make sure that American technology wins the race to the 21st Century.
There's been an evolution in thinking on this issue in Congress. About a year ago, the then-Senator from Massachusetts, Paul Tsongas, confessed that he had voted against the first capital gains tax cut for the very simple reason, to him -- he said that it was probusiness, while most House Democrats were reflexively antibusiness. Senator Tsongas had a change of heart though after the measure was passed. And to quote the Senator, he said: ``That bill, which I did not support, did more for the economy of my State than anything I did as a Congressman.''
Well, today we can see that many more Democrats in the Congress have had a change of heart, and that we're building strong bipartisan support for a progrowth policy.
I hope you all saw Rosty on TV last Tuesday night after my speech. ``Rosty'' is short for Dan Rostenkowski, the Democratic chairman of the House Ways and Means Committee. He's all for tax fairness and simplification, too. And he asked the American people to write in and tell all of us in Washington where they stand. Well, we've gotten a tidal wave of mail telling us, quite simply, to go for it. So, keep those cards and letters coming in. [Laughter]
By streamlining our tax code, we'll speed our progress. Our present tax code diverts too many of our precious resources into wasteful loopholes and tax dodges like jojoba bean shelters, windmills, racehorse writeoffs, and Cayman Island trusts. These shelters are not only economically unjustifiable, they're unfair to the vast majority of unsheltered taxpayers who have to make up the difference with higher tax rates. It's about time that we pulled our investment money out of foreign tax havens and put it back into fueling America's economic growth.
By closing these loopholes we'll be able to put the three tax rates that most directly affect America's -- or cut the three tax rates, I should say -- that directly affect America's entrepreneurs. Not only will we lower the capital gains tax and give venture capital another shot in the arm, we'll also cut the corporate tax, continue graduated tax rates for small corporations, and bring the top personal income tax rate down to its lowest level in more than five decades. In addition, we're preserving incentives for research and experimentation that are so important to investment in techological innovation. As I said last Tuesday night, it's our ambition to make these next decades of American history the age of the entrepreneur.
Every day America's inventing a better future -- new miracle medicines to cure disease and prolong life, and ingenious new mechanical organs that can duplicate the work of nature; silicon chips, tinier than your thumbnail, are able to process more information than a whole computer used to; new metals and plastics that strengthen our defenses and would extend man's habitat into space by the end of the century; new disease- and insect-resistant grains that will help feed a hungry world. Maybe even someday high-tech will invent a cure for the bureaucracy down in Washington. [Laughter]
Right now the army of lobbyists and special interests are dug in around the Capitol Building, firing every weapon in their arsenal in an attempt to shoot down our proposal for tax fairness and tax simplification. They're allied with the Washington sophisticates and so-called experts who tell us that tax simplification will never pass, that it challenges too many of those interests and takes away the special privileges of a powerful few who like the present tax code just fine. But I think the sophisticates and the lobbyists and the experts have forgotten one thing -- they've forgotten about you.
They've forgotten about the rest of America that exists beyond the shores of the Potomac. So, I think it's about time that we reminded them. Let's make them hear what America thinks. And remember, Washington is a few miles off, so you're going to have to speak up if you want Pennsylvania to be heard.
Do the people of Pennsylvania want a tax system that's needlessly complicated and unfair?
Audience. No!
The President. I can hear you, but the walls of that Capitol Building are pretty thick.
Do the people of Pennsylvania want a tax system that discourages entrepreneurship and puts a lid on innovation?
Audience. No - o - o!
The President. Do you want a tax system of, by, and for the tax lawyers?
Audience. No - o - o!
The President. You're doing just fine. [Laughter]
Or do you want a tax plan that is fairer and simpler, that lowers tax rates for your families, and that gives high-tech a boost?
Audience. Yes!
The President. Thank you. [Laughter] You just made my day. [Laughter]
Hope and optimism are what drive the American people, and if they set their minds on something, you can bet it'll happen. We're a can-do nation, with little patience for the voices of resignation and the status quo. Two centuries ago, not far from where we stand today, General Washington and his army of patriots endured terrible suffering in the snows of Valley Forge because they knew that their winter of hardship would be followed sooner or later by a springtime of liberty. Those were the times that tried men's souls. These are the times that challenge our hearts and minds.
It's time to take another step in that long march of freedom, to make our future big and adventurous and worthy of our past. Now is the time to inaugurate the second American revolution of hope and opportunity, to declare our independence once again, and to commit ourselves to the ideals that have always kept us strong and free and true. We can do it.
Thank you, and God bless you all, and let's get in out of the rain.
Note: The President spoke at 12:11 p.m. to an outdoor gathering of center employees and their families. Following his remarks, the President had lunch with a group of chief executive officers of area companies. He then traveled to Camp David, MD.