Remarks to State and Local Officials During a White House Briefing on Tax Reform

June 27, 1985

Well, thank you very much, and, unless someone has already said it here, welcome to the White House. I always enjoy saying that over here because it's just one of those Washington oddities that the Executive Office Building, one of the oldest government buildings here, is always called the White House. I haven't eaten a meal here but -- [laughter] -- --

Well, it's an honor to welcome all of you here today, so many State legislators, mayors, and local officials. Sometimes I can't help thinking of people like you as emissaries from the real world -- that great land that lies beyond the Potomac -- where a special interest is a hobby like fishing, and a lobbyist is someone who hangs around a hotel. [Laughter]

But now, I know that you've already been briefed on a number of specific aspects of our proposal for all Americans to pay their fair share of taxes and no more. Permit me then to give you an overview, if I can, of why I believe this plan is so important and how it'll affect you in those very difficult jobs that you have to perform in your States and localities.

When the income tax first became law back in 1913, the tax code amounted to just 15 pages. Today it runs 4 volumes, and the number of pages adds up to more than 4,000. The complexity alone is staggering, but worse is the unfairness, the simple injustice that such complexity engenders. You just know that with a tax code that complicated, there are going to be accountants and lawyers who know how to make it work to their advantage and to the advantage of their clients -- and that ordinary Americans who can't afford such high-paid professional help will end up paying for it with higher taxes. When it comes to taxes, one man's loophole is another man's noose.

Many Americans, individuals and families, paid a higher tax rate last year than the gigantic corporations that they work for. And well-to-do individuals are able to take so-called educational ocean luxury cruises or buy sky boxes at sporting events and write it all off as business expense. Now, I'm certainly not against big business or businessmen. These are the people who provide many of our jobs and create much of America's wealth. What I am against is the unfair tax system that allows them to take perfectly legal deductions, deductions that by virtually any standards of fairness are ludicrous.

The key idea in our proposal is that by ironing out the complexities and closing unfair loopholes, by making everyone pay their fair share, we can make the system more equitable and dramatically lower marginal tax rates without a loss in revenue. Lower marginal rates for both individuals and corporations will mean a greater reward for work, saving, and risk-taking, more efficient use of scarce capital, and a stronger and healthy economy. In other words, our fair share plan is also a progrowth tax plan.

Another key component of our proposal is to provide America's families with a long overdue break by practically doubling the personal exemption. Indeed, our plan would drop virtually every poor family in America off the tax rolls entirely. And a working family with two or three children would pay less than a 10 percent income tax on its earnings well into the $25,000 to $30,000 range.

Now, I know that many are concerned about our proposed elimination of the State and local tax deduction. Well, the first point to make here is an argument for fairness -- and I have a hunch that maybe somebody here's already made this argument -- but only about one in three itemize their deductions and get the benefit of that deduction. There can be no justification for a preference that gives the wealthiest -- one taxpayer in three -- a rebate on local taxes while its less fortunate members -- or neighbors pay a full dollar locally plus higher Federal taxes in order to fund that rebate.

Recently, too, I heard some good news from my home State of California. Now, California is generally considered one of the high-tax States and so, according to the prevailing wisdom, would have the most to lose from the loss of deductibility. The Los Angeles Times has reported, however, that the State Franchise Tax Board has completed a study, finding that Californians would dramatically benefit under our new plan.

In the end, all America will benefit from this fairer, progrowth tax plan. In the words of Democratic Governor Michael Dukakis of Massachusetts, ``If my taxpayers are better off, particularly my middle-income taxpayers are better off under this plan, that's really the issue, isn't it?''

Well, lower tax rates, doubling the personal exemption, an end to loopholes -- it all adds up to fairness, more growth, more jobs, and renewed hope for our future. My friends, isn't that why we are all in government in the first place?

So, I'm going to get back over to the Oval Office and turn you back to these people here for your questions. And again, I thank you all for coming here and for letting us tell you about this.

You know, for as many years as I can remember it, there have been voices raised in Washington about the ever-increasing complexity and difficulty of the tax and saying that we should have tax reform. And finally, for the first time, I think it's within reach. It's been talked about; it's never been attempted. Well, here it is, and we've got a chance to go at it. And then just think, even Einstein will be able to fill out his 1040, which he couldn't do himself. [Laughter]

Thank you all. God bless you.

Note: The President spoke at 11:32 a.m. in Room 450 of the Old Executive Office Building.