The President. Thank you. Now, don't go too far away with those. I won't wait till the ranch. Every once in a while I see on my schedule that I am having a working breakfast with the congressional leadership. As long as I am working, I'll wear those. [Laughter] It might impress them enough that we will get things done.
I thank you all. It's good to be in Oshkosh, B'gosh! A lot of your schoolchildren were out at the airport when we came in, and I told them that when I was their age and their size I was wearing them, and at that time, though, they had it on and as a kind of a trademark in stripes where it said "Oshkosh, B'gosh" on the overalls.
But it's an honor to be here with your outstanding Senator Bob Kasten and your superb Members of the Congress, Tom Petri and Toby Roth. Each of them is serving the people of Wisconsin and our nation with high distinction. And Bob Kasten has long been a leader for the kind of reform that I would like to talk to you about now. The night before last, television networks were kind enough to give me a few minutes to talk about our system of taxation. I announced our plan to put more resources into the hands of the American people by making our tax code more simple, fair, and efficient and the most sweeping change in our tax laws it would be in more than 70 years. I knew we were on the right track when the high-priced tax attorneys started shedding tears after I spoke.
And now that I've come to Main Street America, and now that I have seen a smile on the face of Oshkosh, I know we said the right thing. [Applause]
Thank you. I'm delighted to be with you and to join in the fun. And, my friends, if you will permit me, I would like to begin by conducting a little poll using an impartial and scientifically selected sample—you. Would you mind answering some questions? For example, do the people of Oshkosh want our tax system to be complicated and unfair?
The President. Well, do you want steeply rising tax brackets that punish achievement and hurt the American family?
The President. Or would you like a dramatic simplification that eliminates loopholes and makes our tax system straightforward, fair for all?
The President. And would you like to see a tax plan that increases personal exemptions, brings tax rates further down, and reduces the tax burden on working Americans and their families?
The President. Well, that's the tax plan that, with your help, we can and will pass this year.
You know, I've been asking people informally about tax reform everywhere I go. And the answers are just the same everyplace I know of except for one city—Washington, DC. Sometimes folks back there are a little slow to catch on. I may need some help getting it through to them that the American people consider it high time for a change in our tax laws. Can I count on you to give me a hand?
The President. All right. Our tax proposal is a true first. It's a plan for fairness, incentives, rewards, and simplicity in taxation. It won't raise taxes or increase the deficit. In fact, we call it America's tax plan because it will lower taxes and expand opportunities. Do you remember about 6 weeks or so ago, the last tax day, April 15th, how you felt, how you prepared to sign that complicated document that turned over a big chunk of your income to bureaucrats you'd never even met? Remember what your kitchen or dining room table looked like with the forms and the receipts and the tax tables spread out across it?
Well, under our tax proposal most of you, if you choose, will never have to go through anything like that again. Form 1040 will be shortened and more than half of all Americans won't have to fill out a tax form at all. It will be just that easy.
Let me tell you how it will work. And don't worry, I can keep it short and simple because it is short and simple. To begin with, we intend to replace the present steeply rising system of 14 different tax brackets with a flatter, three-step design that will allow you to keep more of each additional dollar that you earn. Currently, tax rates range all the way up to 50 percent, 14 brackets. Under our proposal there will be only three tax rates—15, 25, and 35 percent, period.
For families, the lowest rate of 15 percent would apply to each dollar of taxable income up to $29,000. The next tax rate, 25 percent, would apply to each dollar of taxable income from $29,000 to $70,000. And the top rate, 35 percent, would take effect on taxable income over $70,000. Now, no matter how much you earned after that, Uncle Sam would never get more than 35 cents of each dollar that you earn.
What does America's tax plan mean for the average family? Well, 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, 35 percent.
The next part of our plan will further help the American family. You may remember that back in 1948 the personal exemption was set at $600. Today, 37 years later, after inflation during the 1970's eroded the value of the dollar and made it so much more expensive to raise children or care for elderly parents, the personal exemption has risen all the way to, well, just to $1,040. And frankly, my friends, I think that's a little ridiculous.
To give your families the break they've so long deserved, we intend to increase the standard deduction to $4,000 and to nearly double the personal exemption for every taxpayer and dependent to $2,000. And we're going to raise it, right away, starting January 1st, 1986. You know that sounds so good, even to me, I'm going to say it again. We intend to double the personal exemption to $2,000, effective next year. And by the way, that $2,000 would also be indexed to protect against any rise in inflation.
Suppose your family wants to save some extra money and invest it in an IRA. Right now our tax system limits—you know what those are, those revenue accounts where you can put money in a savings account and you don't have to pay tax on it for having done that—right now, our system limits IRA's to $2,250 per household. Again, my friends, that makes no sense. Homemakers should have the same rights to IRA's as wage earners. In economic terms, homemakers produce goods and services that are invaluable. And by nurturing our children, caring for us when we get sick, and looking after the elderly, they—perhaps more than any others—give our country its strength and heart.
And here's where we get the next part of our tax plan, also designed to help the family. Under our proposal, every husband and wife will have the same access to IRA accounts—up to $4,000 a year for each couple.
Now, you can begin to see how much easier that'll make it for families here in Oshkosh and around the country to make ends meet. Consider a Wisconsin family of four struggling at the poverty line with an income of $12,000. By raising the level at which people begin to pay taxes and by doubling the personal exemption, our plan would ensure that the family would pay no Federal income tax at all—none.
Or consider a larger working family of six, one that lives right here in Oshkosh, earning the median income—that's at the half-way mark of all earnings, $26,000. By taking advantage of our proposal, including the new IRA provisions, that Oshkosh working family could reduce its taxable income to only $8,000 and pay 15 percent of that $8,000, just $1,200 for an effective tax rate of less than 5 percent.
Now, I want you to know that I've got a little holdout. There's a little group over there—I'm going to raise their taxes. But seriously, all the way up and down the income scale, the overwhelming majority of American families will find themselves with more resources to devote to their children, to pay for their home, and, perhaps here in Oshkosh, to buy a boat, and to put away for retirement. That sounds pretty good to me. Does it sound good to you, too? [Applause]
Well, all right. You know, they may have heard you all the way to the Congress in Washington.
But another problem with the tax system as it stands now is that it looks like Swiss cheese. Now, Wisconsin is famous cheese country, so you know what I'm talking about—big holes no matter how you slice it. Well, under our proposal, tax breaks for things like windmills and so-called educational ocean cruises will all be eliminated or drastically reduced.
We want to do away with a tax code that reflects years of lobbying efforts by powerful special interests. Instead, we want a tax code for Main Street America—one that will help people like the worker at Oshkosh Truck Corporation and his family, the youngster who's just graduated from Oshkosh West High and is— [applause] —and maybe is starting work here in town as a clerk at Kline's— [laughter] —the teller at the First Wisconsin National Bank and her children.
But as we throw out the bad in the old tax system, we'll be sure to keep the good. The home mortgage interest deduction reflects our nation's historic commitment to the value of homeownership. For principal homes it's a deduction that we intend to keep. Likewise we will retain preferential treatment for Social Security and veterans' disability payments and keep in place the current itemized deductions for charitable contributions.
On the business side, our tax plan will be just as sweeping, one that will clear the way for surging business formation, job creation, and the technological innovation that fosters so much of our economic growth. The tax plan for business includes a reduction in the maximum corporate tax rate, down from 46 to just 33 percent. The institution of a minimum tax to make certain that all corporations pay a fair share and a reduction in the maximum tax on capital gains.
Now, many of you'll remember the late Congressman from Wisconsin, our dear friend, Bill Steiger. Bill's father, Carl, is on the dais here today. I would like to have him stand. Carl, take a bow.
Well, back in 1978 Bill Steiger engineered a cut in the maximum capital gains tax from 49 to 28 percent. Almost instantly the amount of venture capital available in our country rose sharply, making it possible to expand existing companies and to form new ones, creating new jobs in the process. The very next year scores of new companies were formed in California's Silicon Valley alone. And in the years since, we've seen capital raised for new ventures increase by over a hundredfold.
Is there someone there that needs some help? We've got a doctor here, I know. If they could get backstage, I know we have got a doctor back here. All right.
Building on Bill Steiger's achievement, in 1981 we cut the top capital gains tax down to 20 percent. And now we want to cut it again down to 17 1/2 percent. This new cut will foster still more growth and job creation, a renaissance of American entrepreneurship.
America was born in the midst of a great revolution sparked by oppressive taxation. There was something about the American character—open, hard-working, and honest—that rebelled at the very thought of taxes that were not only heavy but unfair.
Today the proud American character remains unchanged. But slowly and subtly, surrendering first to this political pressure and then to that, our system of taxation has turned into something completely foreign to our nature—something complicated, unfair, and in a fundamental sense, un-American. Well, my friends, the time has come for a second American revolution.
From Oshkosh to Miami to Santa Fe, we, the people, must unite. Those who have been elected to positions of public trust must show true leadership and political courage. For the sake of our traditions of liberty, for the sake of our strength and prosperity as a nation, but most of all for the sake of our families, we must take this next step toward freedom. Let us resolve here today, during this dawn of the second American revolution, that this great task shall be accomplished. We can do it, and if you help, we will do it this year. America, go for it!
You know, back in 1913—I just say this in closing—back in 1913 when they were discussing having an income tax and having an amendment to the Constitution to make it possible, there was one Senator who rose on the floor of the Senate, and he said something at the time that was very prophetic. He said, "We must have this tax not for government's needs, but for government's wants." Well, I think for the last 70 years government has been wanting too much, and let's get it back to where we pay for what it needs and no more.
I just told some people back in Williamsburg, Virginia, this morning, that some of us who are there now in Washington—we keep talking about ourselves as "we" when we talk about government—or I should say "they" when we talk about government. And I've told our people, when we start talking about government as "we" instead of "they," we have been there too long. I think I outlasted them.
So, I thank you all. God bless you all and God bless this wonderful city of Oshkosh. Thank you all very much.