Letter to the Chairman, House Ways and Means Committee, on the Tax Bill.

[Released March 22, 1962. Dated March 21, 1962]

Dear Wilbur:

May I congratulate you, and your associates on the House Ways and Means Committee, on reporting to the House a tax bill that will truly serve the national interest. I know how thoroughly your Committee has reviewed the essential elements of this measure for nearly a year; and I am hopeful that the members of the House will support the product of your long deliberations and labors, and send to the Senate a bill consistent with our nation's economic, budgetary and balance-of-payments needs. Rejection of this bill, I firmly believe, would mean a loss of gold as our industries fail to keep pace with their modernized overseas competitors--a loss of jobs as our economy fails to grow--and a loss of revenue, resulting in further budget deficits, as we fail to achieve full employment before another recession, or fail to collect fair taxes on every kind of income. Although imperfections or alternatives can always be advanced with respect to every provision of every tax bill, your Committee has capably met its obligation to achieve a careful balance of interests.

The single-most important provision in the bill would provide a tax credit for new investment in machinery and equipment in the United States. This tax credit, by increasing the profitability or potential rate of return on such an investment in the most efficient and economical way available, will provide American businessmen with a strong incentive to increase their capital goods expenditures in this country, with many beneficial results.

(1) It will help increase the pace and duration of the present recovery, in the lagging capital goods and construction industries and in all others.

(2) It will spur our long-term economic growth and prospects for full employment by adding to our existing capacity, or translating technological development into new capacity, leading to new products, new processes and new job opportunities.

(3) It will induce the modernization and expansion of our productive machinery and equipment, enabling American business and labor to compete at home and abroad with the modern plants of the European Common Market and other nations, thereby reducing the pressure on our balance of international payments and assuring our continued ability to meet vital overseas commitments.

(4) It will reduce the incentive to invest machinery and equipment in other nations which presently accord such investment a more favorable tax treatment; and it will do this in a manner which gives the nation a far larger assurance of new dollars invested for every dollar of revenue foregone.

You have, of course, included in this measure other provisions--to make certain that, over the long pull, no loss of revenue will result from the bill as a whole, and to eliminate existing defects which defeat Our traditional objective of spreading the tax burden fairly in an equitable economic environment. Outstanding among these pro visions is the extension of the present withholding tax to dividend and interest income. This is not a new tax. It only makes certain that taxes now due are in fact paid. Those whose incomes depend on wages are subject to withholding. Those whose incomes depend on salaries are subject to withholding. Why should those whose income is received in dividends or interest be treated differently, permitting an escape from taxes by a deliberate or neglectful failure to report such income?

Similarly equitable is the provision which closes off unrestricted access to foreign tax havens and otherwise lessens present tax inducements to American capital to move into Western Europe or Japan. At a time when American servicemen, their .families and tourists in particular, and the entire nation in general, are restricted by the necessities of our balance of payments posture, there is no reason why we should encourage tax havens which artificially hold back a return flow of American overseas earnings.

Other portions of the bill as reported are equally helpful to the national interest; and again I want to express my gratitude to you and your colleagues on the Ways and Means Committee who have supported you in this effort to make America strong and vigorous.

Sincerely,

JOHN F. KENNEDY

[Honorable Wilbur D. Mills, Chairman, Ways and Means Committee, House of Representatives, Washington, D.C.]