I don't know if you happened to be watching TV last night, but the networks were kind enough to give me a few minutes to speak about a subject that's very close to my heart and close to your wallets. I'm talking about our historical -- or historic proposal to completely overhaul that old jalopy of our tax system, replace it with a fairer, simpler, sleeker, more compassionate model -- an all-American tax plan providing new freedom, fairness, and hope for all.

Short of sending the IRS, the Internal Revenue Service, on a permanent holiday, this historic reform will give the long-suffering American taxpayers the most relief they've had since, well, at least since our historic 23-percent tax cut of 1981.

They say that as you grow older you get set in your ways and that certain habits become ingrown. I guess when it comes to cutting taxes, I'd have to plead guilty to that. But I gave them fair warning. After those first dramatic tax rate cuts passed, catapulting our economy out of malaise and putting American industry on the cutting edge of progress, I told them, ``You ain't seen nothin' yet!'' [Laughter]

Our proposal is not a tax increase, and it will not increase the deficit. It will mean lower taxes for a majority of Americans, with expanded opportunities to save and invest. We want to do away with the trials and tribulations of filling out your tax forms for as many people as possible. Eventually, as many as half of all the taxpayers won't have to worry about 1040 Forms. They won't have to fill out any tax form at all. We're thinking of calling this one the zero form.

We're replacing the present steeply graded system of 14 different tax rates with a flatter, simpler, 3-step design that will allow you to keep more of each individual dollar that you earn. That means you'll get to save more of that raise that you earned, or if you go out there and work extra hard, you know that you're doing it for yourself and your family, not just to line the pockets of the Federal Government. It's our belief that the tax system should no longer be an obstacle course on the road to success.

What does America's tax plan mean for the average family? Well, I enjoy talking statistics, so let's talk a few. Of those who file and pay taxes, 7 in 10 will pay at a maximum rate of 15 percent, and fully 97 percent of all taxpayers will pay no more than 25 cents on the very last dollar they earn. Only 3 percent of America's families will have to pay at the highest rate, which will be 35 percent.

We're also going to give the American family a long overdue break by virtually doubling the personal exemption to a full $2,000. [Applause] Well, after that I guess I don't have to explain to you -- that's $2,000 for every man, woman, and child. We're also increasing the standard deduction to $4,000 for a joint return. That means a family of four wouldn't pay a cent in income taxes on the first $12,000 of income earned.

Our plan will also mean an historic correction of a problem we've let go on too long -- the increasing tax burden on low- and fixed-income Americans that's been knocking the bottom rungs off the ladder of opportunity. A compassionate, profamily opportunity society should give a break as well to those Americans struggling to get by and move up. And that's exactly what we intend to do.

By hiking the earned income tax credit, indexing it for inflation, and practically doubling the personal exemption, we can make sure that the working families do not suffer under the burden of Federal taxation. Giving a leg up to those struggling to move up is what America is all about. And that's a top priority of our tax proposal.

We're also going to make some other chances to help families -- or changes, I should say, not chances. Right now our tax system discriminates against homemakers, making IRA's fully available only to spouses who work outside the home. We're going to change that. Believe me, the work of the homemaker deserves to be treated with as much dignity and worth as that of any other worker. Well, it's a pretty hare-brained social policy that punishes spouses who decide to stay home and take care of the children. So, now every husband and wife will each have full access to an IRA tax-deductible savings account up to $4,000 a couple every year.

I think you can begin to see that making ends meet is going to be a lot easier for a lot of people under our plan, especially those of low and modest incomes who find it difficult to cope under the existing unfair code.

We're making many changes. But while we're throwing out the bad in the old tax law, we're being sure to keep the good, with special attention to those provisions that protect our families. The home mortgage interest deduction will be kept in full for principal residences, and no less than $5,000 will still be deductible for other interest expenses, which could include a second residence.

Deductions for charitable giving, medical bills, and casualty losses and the current preferential treatment of Social Security and the exclusion of veterans' disability payments will be maintained.

Now, you may have noticed that I haven't mentioned some tax deductions which are currently on the books -- tax loopholes for things like windmills and so-called educational cruises on oceanliners. But we're eliminating or drastically curtailing these sort of tax dodges, which are really no more than windfalls to a privileged few, loopholes that everyone else ends up paying for through higher tax rates.

Also, in the interest of fairness, we're removing the reduction -- or the deduction for State and local taxes, which has until now been one of the major pressures pushing up the tax rates of the American people. I don't believe that we can justify a system that forces taxpayers in low-tax States to subsidize the big-spending policies of a few high-tax States. That really is taxation without representation. And contrary to what some have been saying, lower rates, doubling the personal exemption, and raising the standard deduction will more than make up for the loss of State and local tax deductions for most taxpayers.

On the corporate side, we're streamlining the present ad hoc system of deductions in order to set the stage for an entrepreneurial renaissance of business formation, job creation, and technological advancement. By lowering the overall tax rates that affect corporations but making sure that every profitable corporation pays some tax, we will be untangling our economy from a bureaucratic tax code that has been distorting our free markets and slowing economic growth.

Together with a lower top rate on personal and corporate income, these changes will immediately open up new horizons to America's entrepreneurs, unlocking the full potential of American industry, and creating jobs and opportunity for all Americans, including those in our hard-pressed cities.

It's been remarked that there are three stages of reaction to a new idea like our tax proposal. First stage is: ``It's crazy. It'll never work. Don't waste my time.'' The second: ``It's possible, but it's not worth doing.'' And finally: ``I've always said it was a good idea. I'm glad I thought of it.'' [Laughter] Well, we're rapidly sweeping up on that third stage. [Laughter]

Even those in this town who are still reluctant are being lifted up and carried forward by the momentum of public support for a fundamental change in our tax laws. And once called impossible, tax fairness and simplification are now all but inevitable.

Congressman Rostenkowski and Senator Packwood have committed themselves to move ahead on tax simplification. Sure, there are those who still have the special interest fever, and they're going to do everything they possibly can to torpedo our program for economic freedom. But with your help and all those cards and letters flooding into Rosty -- [laughter] -- signaling support of tax simplification, we have only one thing to say: America, go for it!

I'm going to paraphrase a statement by Admiral Farragut -- cleaned up just a little: Blast the torpedos! Full speed ahead! [Laughter] For too long we've lived with a tax system that is a blot, a stain on the shining mantle of our democratic government. We've quietly tolerated a tax code which we know is an outrage, one riddled through with special privileges and inequities that violates our most fundamental American values of justice and fair play.

As I said last night -- and I bet a lot of you here today would agree with me -- in its very spirit and substance our tax system could only be described as un-American. Well, there are two things we can do about it. We can either declare April 15th a day of national mourning -- [laughter] -- or we can change the system. And I don't think Americans can recognize an injustice without trying to change it.

Now, that's how this great country got started. Our forefathers rebelled against the injustice of oppressive taxation. In place of King George's despotism, they created a government of, by, and for the people -- a new democratic nation in which all men were created equal.

Today we're undertaking another great adventure in freedom -- a second American revolution, a peaceful revolution of hope and opportunity. And one of its first orders of business is to toss our present moldy tax code overboard and get a new one.

It's my most profound hope that this effort will be a bipartisan one, that forward-looking Members from both sides of the aisle in Congress will join us in this great endeavor. If I get up to Boston in the near future, I'm going to invite Tip O'Neill over for tea to discuss a -- [laughter] -- tax proposal. It makes sense, the two of us having our own Boston tea party. [Laughter]

But for the sake of our traditions and for the sake of our present well-being and future happiness, we must take this next vital step toward freedom. It'll be good for our economy; it'll be good for individuals; it will be fairer and more just. But most of all, it will help strengthen America's most important institution -- the family. As I said last night, this is the single, strongest, profamily initiative in postwar history.

The family is the moral core of our society, the repository of our values, and the preserver of our traditions. The family's like a tree with its roots in the experience of past generations and its branches reaching boldly out into the future. Our families are the safe haven where we're taught charity, generosity, and love and from which spring our most cherished concepts of human dignity and the worth of each individual life. It's there that we learn to nourish the young and care for the elderly.

In our contemporary society, we find so many of our fundamental values have come under attack, but I believe the moral vision of family life is still carried in America's heart. And we know that the underlying truth of that vision is what keeps us good and strong and makes our nation the land of the free and the home of the brave.

In raising the next generation of Americans, the tired breadwinner and the exhausted homemaker are doing the essential work of our society.

You know, every once in a while I've heard people say we don't have any heroes anymore. They haven't looked around their own neighborhood. You see them getting up, sending the kids off to school, going to work every morning, supporting their church and their charity and all the good things in this society. You bet they're heroes. It's through their sweat, toil, and tears that the foundations of our society are built, and America's tax plan will simply give them a little help.

We've come too far down the road of progress to turn back now. I don't believe that having tasted the success of these last 4 years, we still shrink from the challenge to make that success complete. Together we can make 1985 one of the milestone years in history, a date that future generations will look back on as marking a crucial step in the steady ascent of human freedom. We can do it. And if you help, we'll do it this year.

My friends, it's been an honor and a pleasure to talk to you on this, the dawn of the second American revolution.

I'd just like to tell you one line that a Senator spoke back around 1913 when they were debating the income tax amendment. And on the floor of the House this gentleman said, ``We don't need this tax for government's needs. We must have it for government's wants.'' Well, they've had long enough for their wants. We're going to get them back to their needs.

Thank you. God bless you all.

Note: The President spoke at 2:32 p.m. in the East Room at the White House.