Federal Tax Legislation

I suppose it's unavoidable that debates over controversial issues like the tax bill should give rise to more heat than light. Still, I think it's important that the American people get the facts behind the sound and fury.

To begin with, this tax bill is not, as it has so often been mislabeled, the biggest tax increase in history. That's plain hogwash. The tax bill would raise $99 billion in revenue over 3 years. The social security payroll tax hike that was passed by the Congress in 1977 will increase the cost of the taxpayers $112 billion over that same period. But more importantly, new personal taxes are only 17 percent of that $99 billion figure.

About 80 percent of the money raised by the tax bill will come from plugging loopholes and from better compliance -- collecting money that is already owed to the government, but is not being reported. The goal is simple and just: to see to it that everyone pays his fair share -- no more, no less. In other words, this bill is 80 percent tax reform, not tax increase. And it's designed with one crucial goal in mind -- to raise revenue that, along with spending reductions, will help cut the whopping Federal deficits that are keeping interest rates up and too many Americans out of work.

It's part of a larger process implementing the budget resolution. Doing so will reduce outlays by about $3 for every $1 that is raised in tax -- reducing deficits by $380 billion over 3 years and continuing our progress toward less government and more economic growth.

On taxes, the proof is in the bottom line. The typical American family this year is paying $400 less in taxes, and next year that will amount to $788 -- almost twice as much even after passage of the new tax bill. That still adds up to what we promised in the first place -- the biggest tax cut ever for the American people.

Q. Mr. President, when you passed that big tax cut last year and signed the legislation, you thought that was going to cure the economy and get the job done. Why didn't it work? Why do we need a tax increase now?

The President. Sam [Sam Donaldson, ABC News], I've heard you ask that question before on the air, and I've wanted to answer you. Thank you for asking it here, where I could.

Q. Now's your chance, sir.

The President. Yes, I will. May I call to your attention that that program -- the first installment of it and the smallest installment went into effect only about 10 months ago. And the second installment went in a month and a half ago, July 1st. And there is a remaining installment to go in on July 1st of 1983. But the very fact that something just simply goes into effect -- the program and the incentive of the program is built on and based on the people and the businesses who are benefiting from these tax cuts, acquiring and accumulating that money, and then having it for use. And to simply say, ``Well, the measure is passed and is now on the books as law,'' doesn't mean anything till the people begin to acquire the money.

But now I can also add, however, it is working. Granted, you don't suddenly see a bonanza, but beginning with the first minor tax cut, that first 5-percent installment, there has been an increase in personal savings that has not been true over the last decade. There has also been an increase now in real earnings -- not just inflated dollars, but there's been running about a 4-percent increase in the actual real money that people have. The drop in inflation that has -- I think we can take some credit for with all of our program -- that drop in inflation has made a family with a $15,000 income, a family of four, have a thousand dollars more purchasing power now than they had in 1980. That's a thousand-dollar raise just through inflation alone, not counting the tax figure.

The fact that interest rates have come down, the fact that retail sales on an annualized basis have been rising since January at about 12 percent -- all of these things, I think are the evidences that we have bottomed out in the recession. And I think that we're entitled to take some credit for that with the program.

Situation in Lebanon

Q. Mr. President, why didn't you take the kind of highly publicized, public action to stop the bombing in Beirut before you did yesterday? Perhaps hundreds of thousands could -- or thousands anyway -- could have been saved. Why not be -- why not go public, no matter what you may have said in private, sir?

The President. Well, much of what we said -- and we weren't silent or idle in all this time that Habib [Ambassador Philip C. Habib, the President's emissary in consultations in the Middle East.] has been working -- but the sensitivity of the negotiations were such that I avoided, as you know, anything that might interfere with those negotiations or in some way injure what Ambassador Habib was trying to accomplish.

However, yesterday the situation was that the negotiations were down -- we had general agreement by all parties finally to the arrangement, and the negotiations were down to the logistics, the technicalities of getting the people -- well, getting the PLO moving and so forth. And those negotiations, literally, were broken off by the extent of that bombing and shelling. The delegates couldn't even get to the negotiation meetings. And I have to be fair and say that, in my first call, I was informed then by Prime Minister Begin that he had ordered a cessation of the aerial bombing, and so, we discussed the artillery shelling from then on.

Q. Mr. President, why don't you tell us a little bit of how you felt in these 9 weeks with people being bombarded and your continuing to send weapons to inflict this horror on them? I mean, what has been your personal feeling?

The President. As I say, this was a matter of great concern, and we were trying to get an end to it. On the other hand, I think that perhaps the image has been rather one-sided, because of the Israeli capability at replying, but in many instances -- in fact, most of them -- the cease-fire was broken by PLO attacking those Israeli forces.

Q. Well, they were the invaders, were they not?

The President. Are they the invaders or is the PLO the invaders? Lebanon is the country -- --

Q. As of June 6th.

The President. -- -- but, on the other hand, if we look now at the stories that are beginning to come out and that some have been public, the PLO was literally a goverment and an armed force in another nation and beholden in no way to that other nation, which was one of the reasons why you didn't hear more protest from the Lebanese Government about the Israeli presence.

Q. Mr. President, you said that yesterday you did have a general agreement, and then there was this firing. Are we back on track today? Do we still have a general agreement? And would you go along with some forecasts that say the PLO evacuation will begin sometime next week?

The President. I'm reasonably optimistic. Now, see, I didn't say ``cautiously.'' I'm reasonably optimistic about this, because I believe that this time the cease-fire is going to hold, and, as I say, the negotiations now are not the case of trying to persuade agreement on the part of the various parties. The negotiations are on the technicalities, the logistical move that must be made in getting them out. And so, I think there's reason for, great reason for hope.

Q. The PLO -- would the evacuation start next week? As early as that?

The President. I can't -- again, I don't want to speculate on that, because I'm not there at the negotiating table.

Here, and then I've got to get back there into those back lines there.

Q. Mr. President, yesterday your spokesman said you were outraged by what had happened. Can you tell us a little bit about what happened in your phone call with the Prime Minister? Specifically, did you raise your voice, and what was the tenor of the conversation?

The President. Well, this is something that I don't do. I won't comment on my communications whether written or spoken with other heads of state. I don't think that's proper, so I won't do that.

Japan and World War II

Q. Mr. President, what is your personal view on Japan's revision of history and the rationale regarding Japan's invasion of China and occupation of Korea, and, also, attack on Pearl Harbor -- to justify the Imperial Japanese military actions elsewhere?

The President. Well, I think we'd be going into past history there. And, of course, those were tragic times. And we think there was a different philosophy than is governing Japan today. And I think the fact that we have been able to forget or forgive -- whichever you want to use -- that period, and become the good friends that we are today, I think, is what we should be more interested in. I would rather not rehash the war feelings that I'm sure were felt on both sides and that led to that tragedy.

Federal Tax Legislation

Q. Mr. President, in view of the fact that until recently, you had resisted any effort to raise revenues in the way that you're endorsing in this bill now, how concerned are you that, regardless of the merits of the matter, the perception among the public will be that you have done what the Republicans always accused Jimmy Carter of doing -- flip-flopped on the tax issue?

The President. I think that the answer's very simple -- and thank you for asking it. There isn't any flip-flop on this at all. I would prefer to reduce our budget deficits by continuing to reduce government spending. And I still think that there is more to be done in that regard. But let me point out that when we submitted our budget this year, the Congress refused to even consider it. And it was based purely on spending cuts. And finally, after long negotiations and the Gang of 17, as it was named -- the bipartisan group that met trying to reconcile this problem -- it became clear that we could not get the spending cuts we were asking for unless we would agree to some increases in revenue.

Now, our first effort to meet that was something that we had said a year ago when we were getting the tax cuts. We said that we were aware that there were areas where unintended tax advantages were being taken by some that were never intended in the legislation. We said, also, that we were aware that there were moneys owed to the government that were not now being collected, and that we were ready at any time to come forth with a package to try and propose that. So, we started in the negotiations with saying, let's implement those things that we've already found.

But the simple fact is, this tax package was tied to the spending cuts we want, and we couldn't have them without the other. But remember, also, that the first demands that were made on us were that we give up some of the tax cuts that we secured last year. And here I dug in my heels and said, ``No; that tax program is based on incentives that I believe are necessary to get the economy moving again, and we will not give up.''

Now, there is nothing in this $99 billion package that in any way interferes. And I think the significance can be pointed out in the figures -- $99 billion over 3 years, only 17 of which is a new tax. And the savings from our tax cuts to the taxpayers will be $406 [402 -- White House correction] billion over the same 3 years.

Q. Just to follow up briefly, the one thing that is included in this package is taxation -- is withholding on taxation and dividends and interest. This is something that you, yourself, denounced during the campaign when President Carter proposed it.

The President. Mm-hm.

Q. As I recall, you said it was a violation of the fiduciary relationship between a person and a bank. What caused you to change your mind?

The President. Well, for one thing, he had asked for 15-percent withholding with no exceptions. Here, once having the information available that you have when you're in this job, we discovered in our studies that one of the areas where there is escape from paying taxes due is in the matter of reporting earnings from income and dividends. And that is one of the large areas where taxes that are due are just not being paid. So, with that in mind, we looked at that very situation.

But we have exempted fully 80 percent or more of the people over 65. They would have to have an income of -- there's a couple of $14,400 before they would be eligible for withholding. For other people not over 65, you would have to have an income -- average family would have to have an income of about 24,200-and-some dollars before theirs would be withheld.

So, what we found is that the withholding is going to apply basically to those people who are in an income bracket where they pay quarterly installments on their estimated income. And, thus, all that happens is the bank or the company paying the dividends will submit that to the government, and they will send their checks for the balance of what they owe.

Yes?

Deputy Press Secretary Speakes. Last question, please.

Situation in Lebanon

Q. Mr. President, has the Israeli action in Lebanon, often against U.S. wishes -- the massive retaliation for violations of the cease-fire by the PLO, has that changed in any way the special relationship between Israel and the United States? And has it changed your own personal views toward Israel?

The President. No, I think -- and I was concerned also that -- the reason for the call, that it could endanger that -- the manner in which it's being portrayed, there's been less emphasis on the provocation and more emphasis on the response. And, yes, I did and have voiced the opinion that the response many times was out of proportion to the provocation. But we can't deny that the Israelis have been taking casualties from those cease-fire violations themselves. I think the figure now is 326 dead of their own military from being attacked in the breaking of the cease-fire.

Q. Has it changed your own attitude?

The President. What?

Q. Has it changed your own attitude toward Israel?

The President. I still believe that this country has an obligation to pursue the peace process that was started in Camp David and that this country has an obligation to ensure Israel's survival as a nation.

Federal Tax Legislation

Q. Sir, do you approve of your people threatening Republican Congressmen on the tax bill?

Mr. Speakes. Sam, we have to quit.

Q. Are you going to make a speech Monday night?

Q. I was just going to ask if -- if the President approves of his people threatening Republican Congressmen with the tax bill?

The President. Now, having asked that, I have to answer that.

No, we're not threatening anybody, and I'm going to do everything I can to get all the Republicans I can into office.

Q. But not threatening them with withholding your support or withholding funds or anything like that?

The President. No, no.

Q. Are you making a television speech Monday night?

The President. We're trying to -- we're trying to make one early next week sometime. I don't know the exact time for it yet.

Mr. Speakes. Thank you.

Q. Thank you.

Note: The President spoke at 2 p.m. in the Briefing Room at the White House.