Mr. Speaker, Members of the Leadership, Members of Congress, ladies and gentlemen:
Today I have signed into law an $11.5 billion reduction in federal income taxes, the largest in the history of the United States.
It is the single most important step that we have taken to strengthen our economy since World War II.
This legislation was inspired and proposed by our late, beloved President John f. Kennedy and passed this week with the support of both Republicans and Democrats in the Congress.
I want to congratulate Secretary Dillon and all the members of the Treasury staff for their diligence and work on this measure through the 13 months that it was pending in the Congress. I especially want to congratulate tonight Congressman Wilbur Mills from the great State of Arkansas for his leadership in the House Ways and Means Committee in piloting the bill through the House of Representatives. I want to especially congratulate Senator Russell Long of Louisiana for his able leadership in the Senate. I also want to thank Senator Harry Byrd of Virginia who, though he was very much against the bill, cooperated to the fullest extent and he saw to it that the majority was allowed to work its will and this bill got a fair hearing and a prompt hearing in his committee.
I would like to explain tonight what this tax cut means to you and why we believe that it will strengthen our economy and why we believe it will bring a better way of life for all of our citizens.
The tax cut will have two far-reaching effects:
First, it will immediately increase the income of millions of our citizens and most of our businesses by reducing the amount of taxes that you must pay.
Secondly, by releasing millions of dollars into the private economy it will encourage the growth and the prosperity of this land that we love.
The new act will cut personal income taxes by nearly 20 percent, or $9.2 billion a year. Nearly $8 billion of that will flow directly into pay envelopes this year. This will begin immediately. The amount to be withheld from your pay will be reduced beginning 8 days from today.
If you are a family of four, here are examples of how this new tax cut will affect you when it is fully effective.
If you earn less than $3,000 a year, you will no longer pay federal income taxes.
If you receive wages of $5,200 a year, your taxes will be reduced by $135 a year, nearly one-third of what you are now paying. Your take-home pay will go up around $10 a month.
If you and your wife both should be working and your combined earnings are $10,000 a year, your taxes will be reduced by $258 a year or a 20-percent cut.
If your income is $20,000 a year, you are paying approximately $4,100 in federal income taxes today. Your taxes will be reduced now to about $3,400.
Business, as well as individuals, benefit by this tax cut. And small business benefits the most. for example, if you own a small incorporated business, your tax will drop to 27 percent. Your machine shop or your small printing plant with profits of $20,000 a year will pay $4,400 instead of the $6,000 that you would pay under the old bill. ,
On larger corporations the rate will drop from 52 percent to 48 percent. Companies can now pay more of their earnings to those who own their stock and they can increase their investments, which in turn will benefit the whole economy.
These are only a few examples. The real important point is that this bill that we have just signed means increasing income for almost every taxpayer and every business in America; and those earning the least, I am glad to say, will receive the most.
These are the direct, immediate results of this bill. But our long-term objective is to raise the entire level of our American economy. The dollars that you no longer pay in taxes will do this.
The first effect of the cut will be to put more than $25 million per day into the hands of the American consumer. This money at the grocers or in the department store, the store owners in turn will spend it for their own needs and, in this fashion, the money will circulate through the economy raising the demand for goods several times the amount of the tax cut.
The same is true of the more than $2 billion which businesses will no longer pay in taxes. They will use much of this money to buy new machinery, for new construction, for goods of all kinds and, most importantly, for the creation of new jobs.
This afternoon in New York a leading industrial economist, Mr. Pierre Renfrett, estimated that the tax reduction will materially stimulate a boom of capital goods expenditures in the year 1964 and 1965. Mr. Renfrett predicts that capital expenditures in 1964 alone will be 20 percent higher than last year.
And one of New York's leading corporation executives told me by phone about 4 o'clock that his company that now invests about $100 million a year in new capital investment plans to increase their capital investments, when this bill is signed, by an additional 15 percent.
One of the largest employers in America was in the White House last week and he told me that when this bill went into effect that they would make capital expenditures in their company that would provide 18,000 new jobs for new employees.
So this response and this responsibility is what makes the American system work. This is a bold approach to the problems of the American economy. We could have chosen to stimulate the economy through a higher level of Government spending. We doubted the wisdom of following that course. Instead we chose tax reduction and at the same time we made conscientious and earnest attempts to reduce Government expenditures and we are constantly looking at those expenditures.
I am requesting reports from each independent agency and each Cabinet officer each quarter of the year on how they can reduce employees under the number provided in their budget. I am glad to say to the Congress that within the next few days we will send supplemental estimates that will provide for a reduction, not many jobs but 7500 under those that we estimated we would need in January when we sent the budget to the Congress and it will provide a reduction in appropriations that we have requested of $30 million.
From time to time we are going to carefully study each department and agency and try to bring those expenditures down further. We have been encouraged in that move by the Chairman of the Ways and Means Committee and the Chairman of the finance Committee; they have proven their faith in us by passing this tax bill, and we are trying to--going to keep faith with them by cutting expenditures. By taking this course we have made this bill an expression of faith in our system of free enterprise.
The ability of this tax bill greatly to improve the vigor of our economy rests in your hands as individual consumers and as businessmen. If America responds to this new opportunity with increased investment and expansion, with new production and new products, with the creation of new jobs which we anticipate, then the tax cut will bring greater abundance to all America-then the federal Government will not have to do for the economy what the economy should do for itself.
But abundance is only the visible evidence of the benefits of a healthy economy, more important is what a strong United States economy means to the preservation of freedom in this world in which we live. There is no asset more precious to freedom, there is no guarantee more vital to liberty than a robust American economy. No one can bury us or bluff us or beat us so long as our economy remains strong.
No economic system anywhere has ever had the success of the American economy. By placing maximum reliance on the initiative and the creative energies of individual businessmen and workers, we have created here in our land the most prosperous nation in the history of the world.
With your help and the help of this legislation let us unite, let us close ranks, and let us continue to build a nation whose strength lies in our program for prosperity and our passion for peace. This is the kind of a country, the kind of a land, the kind of a nation that offers a better life for you and your family. And it is the kind of a land that we want to preserve and protect.
Again to those of you who served on the tax committees, from the business community to the Members of the Congress present here tonight, I want to say on behalf of the American people, thank you.
God bless you.