September 2, 1985
The President. Thank you very much. And before I begin my remarks, I think out of deference to those who accompany me here on the wagon, I'm going to dictate a change in the wardrobe of the day.
[At this point, the President removed his jacket.]
Well, Governor Ashcroft and Mayor Potts, the distinguished guests here on the platform, and all of you ladies and gentlemen, thank you very much. It's wonderful to be in Independence, and I'm especially pleased to be here for the 13th annual Santa-Cali-Gon Days celebration. I was born in the Midwest, oh, sometime back -- [laughter] -- well, not that long ago. There's no truth to the rumor that I waved goodbye to the Donner party when they headed west. [Laughter] But the trails that we remember today were still being used up until around the turn of the century. And when I was born, stories of the pioneers and what they went through were still close to our experience. The spirit that won the West is still, in my opinion, very much with us in this country, and that's good. We have great challenges ahead of us, and we're going to need it.
Now, this is the first time that I've really been out on the stump since I was in the hospital, and I missed doing this. I missed it. I even miss hecklers. [Laughter] I'm very happy to be in Truman country on this Labor Day. I want to talk about -- [applause]. I have to digress for a moment because there was a wonderful sign down here that just told me to give 'em hell. [Laughter] And I'm very proud, and I learned directly from President Truman that he had not said that. Someone had said it to him, and his reply was, ``I'll tell them the truth, and they'll think it's hell.'' [Laughter]
Well, I want to talk about tax reform, and I wanted to be here with you, the men and women who work hard to support yourselves and your families with your weekly paychecks. You're always there when your neighbors need help, when the community needs help. It's the working men and women of America who pay the taxes, foot the bills, and make the sacrifices that keep this country going. And I'm here to talk to you about a long overdue change in our tax laws, a change that is aimed at benefiting you.
Now, tax reform has its enemies, especially among the people who have vested interests in the status quo. Status quo -- that's a Latin name for the mess that we're in with our present tax structure. Those vested interests just hate it when we talk about reform, and they loved it when they thought I was laid up and out of action. Well, I'm back and rarin' to go, up for the battle that's only just begun. In fact, when I think of all the good people who've pleaded with the Federal Government for years to clean up our tax structure, I'm reminded of a recent, very popular movie. And in the spirit of Rambo, let me tell you, we're going to win this time.
I've been thinking about ways to sum up exactly how disgusted I am by our current tax structure, and I read a little story Harry Truman once told when he rejected a bit of bad policy. He vetoed a bill, and in doing so he said: ``I intended to veto it all along. In fact, I feel like the blacksmith on the Missouri jury. The judge asked him if he was prejudiced against the defendant, and he said, `Oh, no, judge. We ought to give the bum a fair trial before we string him up.''' [Laughter] Well, let me tell you why we ought to take our current tax system out and string it up. It's been tried and found unfair, unworkable, and unproductive. It is a system that yields great amounts of revenues, but even greater amounts of discontent, disorder, and disobedience. It's a system that yields a lot of things that we have to have -- of course, that money -- but a lot of things we don't need at all.
Our current tax system is antifamily: It gives a measly little deduction of just over a thousand dollars for each dependent. Our current system is an assault on personal improvement and effort: It taxes you at such rapidly increasing rates when you work overtime that the harder you work, the smaller the share of your income that you take home. Our current tax law is antigrowth: It discourages enterprise, and it discourages productive investment. Our current tax law is unfair: It clobbers people who don't have a team of legal advisers and accountants to look after their interests. It's supposed to be progressive -- meaning the highest earners are supposed to pay a greater percentage of their earnings than, say, the typical mid-class family. But does it work out that way?
Audience. No!
The President. Recently the Treasury Department completed a study on the taxes paid by those in the top brackets. It wasn't a very pretty sight. True, nearly half paid the heavy tax, but a sizable number took advantage of the so-called loopholes and tax shelters. In the year 1983 there were 260,000 persons who had incomes from all sources of a quarter of a million dollars a year or more; almost 30,000 of them paid virtually nothing at all. There were 28,000 people who made a million dollars or more in 1983; more than 900 of them didn't pay a dime in taxes, and 3,000 of them paid less than 5 percent of their million-dollar-plus incomes.
Treasury added it all up, and they found that 17,000 taxpayers whose income was anywhere from a quarter of a million dollars a year to millions of dollars a year paid taxes of less than $6,272 apiece. Now, the reason I used that figure, it just happens that $6,272 is just about the tax that is paid by a family of four with two workers in the family and an income of $45,000 a year. Now, undoubtedly some of these high-income people had legitimate losses from bad investments, or maybe there were cases of lawsuits and legal decisions that went against them. But for a great many, it was simply the opportunities provided in the present tax law, with all its complexities, its shelters to hide in, loopholes to get lost in -- the legal scams that are worked by people who don't want to pay their fair share. And the middle class gets stuck paying most of the bills.
Now, we all agree that the current system is bad, but we've never quite reformed it. Why? Well, one reason is a good, healthy skepticism on the part of our people. They've heard too many promises by too many politicians about how their lives are going to be made better. They have been hurt too many times by elected officials who promised better and delivered worse. Well, maybe another reason we haven't changed the tax structure is that in a democracy like ours, it's hard for us to get worked up and united over something unless it's truly dramatic, like, say, a very sensational murder. Well, our present tax code is not a sensational murder -- it's more like a daily mugging, and we've begun to get used to it. But another, and maybe the biggest, reason we haven't changed the tax structure is that change has been resisted at every point and is being resisted today by vested interests, those who profit from the status quo -- organizations that enjoy special tax advantages, special interests, and various professionals who are doing just fine, thank you, under the present, unfair system.
There's a whole slew of people and lobbying groups who share a kind of self-righteous self-interest. They're well represented in Washington, and they're not dumb. They never say, ``We're against tax reform because we're in Fat City.'' Their favorite word is ``but.'' ``We're against tax reform'' -- well, they say, ``I like it, but we can't lose State and local tax deductions.'' Then they say, ``I like it, but I don't like the capital gains part,'' or whatever other part it is they don't like. Well, all I can say to the I-like-it-buts is: Our tax reform bill isn't for special interests; it's for the general interest. And I'm here to declare to the special interests something they already know and something they hope you won't find out. Our fair share tax program is a good deal for the American people and a big step toward economic power for people who've been denied power for far too long.
We have just received a report from Congress, from the House of Representatives, which is controlled, as you know, by the Democratic Party. The House Select Committee on Children, Youth, and Families has called our tax plan the most profamily of all the tax proposals before Congress. Now, this congressional committee says it is fair to low-income working families, fair to large families, single-parent families, and average-income families. Now, that sounds like a pretty fair appraisal. And it doesn't come from the people in my own party; it's coming from the majority party, the Democrats. On this issue, I'm pleased to say that apparently we're not Republicans and Democrats on this; we're Americans, and we've got something to do for America.
Under our plan, middle-class earners will be helped by an increase in the personal exemption from the present $1,040 a year to a more reasonable $2,000. Take a family of four, that means $8,000 is untaxed because of exemptions, and another $4,000 is untaxed because of the standard deduction, which we're raising to $4,000. So, in all, that family of four will find the first $12,000 of earnings won't be taxed one penny. We're going to keep the itemized deductions that speak directly to how Americans live their lives -- the mortgage interest deduction on the house you live in and a deduction on charitable contributions and medical expenses. But silly or unproductive tax shelters will be eliminated in our tax reform.
Another reason for tax reform: Even as we clean up the current system, we will be lowering rates for the vast majority of Americans. Lower rates will mean more money stays with you in your hands, more money for savings, more money for investment and economic growth. For each added dollar that you earn up to $29,000 of taxable income, you get to keep 85 cents out of each dollar. Above $29,000 and up to $70,000, you keep 75 cents out of each dollar. And above $70,000, you keep 65 cents of every additional dollar. The highest percentage of tax cut goes to those who earn from $20,000 a year or less. They get a cut of 18 percent. The next biggest cut goes to those who earn from $20,000 to $50,000. They get a tax cut of 7 percent. And the lowest tax cut goes to those who make $50,000 or more. They get a cut of just less than 6 percent.
Now, we think this is quite an improvement over the present complicated 14 tax brackets. Did you know that Einstein actually said he couldn't understand the Form 1040? [Laughter] But still it remains, as you can see, that some of the progressive features are retained of the present. But all this means an America bursting with economic opportunity, an America rolling out new jobs the way we used to roll Model T's off the assembly line. And all of that means a better chance for our kids and a first chance for those who've been denied economic power for much too long. If our fair share tax plan didn't bear within it the promise of more justice, more equity for every American, I would never support it.
A few minutes back I mentioned Americans' skepticism about politicians. And when I did, I have a hunch you said to yourself, ``Look who's talking.'' Well, it's true I've been in public office for more than a dozen years now, with roughly 3 years and 4 months to go, the Lord willing. And since the Constitution limits a President to only two terms, there are no more elections for me, and, therefore, no need for political considerations in any decision that I'm called on to make. So, like you, I'll be living the rest of my life with everything that we do in Washington in these next few years. And that's why I want tax reform for all of us.
Now, what can you do? Will you write your Congresswoman or Congressman? Will you write your Senators? Believe me, having been there a few years I can tell you they do read the mail -- they count the mail. [Laughter] And you do have an effect. They need to hear from you. Tell them to go for it. And if you do, I promise you we are going to win this time.
Well, thank you, and God bless you. And may I just add quickly here: As I said, I've been thinking a lot about Harry Truman. I remember when he took a step toward targeting tax reductions to help the poor and those in lower income groups. And I'm proud to be talking about this good deal in the home of the father of the Fair Deal. And I just figure we're taking another step toward independence in Independence. I think Harry would be very pleased.
Thank you all very much. God bless you all. Thank you.
Note: The President spoke at 2:12 p.m. at the Jackson County Courthouse. Following his remarks, the President returned to Washington, DC.