Radio Address to the Nation on Federal Income Taxes
My fellow Americans:
In just a few days, the date many of us dread more than any other will be upon us—April 15th, deadline for filing income tax returns.
Like Federal employees, taxpayers also work for the Government—they just don't have to take a civil service exam. Here in America, land of opportunity, governments at all levels are taxing away 40 percent of our nation's income. We've been creeping closer to socialism, a system that someone once said works only in heaven, where it isn't needed, and in hell, where they've already got it.
We know that the secret of America's success has been our drive to excel, a spirit born and nurtured by our families. With their dreams and hard work, they've built our nation, made her great, and kept her good. Everything we've accomplished began in those bedrock values parents have sought to impart throughout our history-values of faith in God, honesty, caring for others, personal responsibility, thrift, and initiative.
But families cannot prosper and keep America strong if government becomes a Goliath that preys upon their wealth, usurps their rights, and crushes their spirit. For too many years, overgrown government has stood in your way, taking more and more of what you earned, no matter how hard you tried.
Make no mistake, the thousands of small businesses and the workers in steel, autos, and housing who have suffered so badly from the recession didn't lose their jobs by chance. Years of confidence—or excuse me, I should say, well-intentioned but strongheaded policies plundered their earnings and crippled their ability to produce and compete. By 1981 double-digit inflation and excessive regulations had driven up the price of their products. Record interest rates made it too difficult for their firms to borrow money to modernize their equipment, and record tax increases sharply increased the price of their labor in the marketplace.
It's taken us 2 years to reverse that damage, get productivity growing again, and foster a recovery that's starting to bring people back to work. We've done it by reducing inflation from 12.4 percent to only four-tenths of 1 percent for the last 6 months, by chopping in half that towering prime interest rate, and by passing the first comprehensive tax rate reduction for all Americans who earn and save since the Kennedy tax cuts in the 1960's.
On July 1st, you'll receive the final installment of your 25-percent personal income tax rate reduction. It's not as much as we wanted, but it's the most we could get given the tremendous opposition to any tax reduction by the spending lobbies in Washington.
Here's what it means to you: A median-income family of four, which earned $26,000 in 1981 and has kept pace with inflation, will owe about $700 less in Federal income taxes in 1983 than if our tax program had not been passed. In fact, because of our tax cuts, that family can earn $3,000 more in 1983 than it did it in 1981 and it will still owe less in Federal income taxes. That's progress and that's what we mean by incentives. If you work or save more tomorrow than you did today, your reward will be greater than it was. More of every dollar of your added earnings and interest will be yours to keep. Then, in 1985, our program will index your tax rates so you won't be shoved into higher tax brackets when you receive cost-of-living raises. This will be a protection we never had before.
Many other features of our tax program were designed to help your families. For working wives and mothers, we've reduced the marriage penalty and increased the child care credit. For family farms and family-owned businesses, we've dramatically reduced the estate tax. For small savers, we've deregulated financial institutions to give you a higher rate of return than you received before. For all of you trying to put money aside for later years, we have introduced strong new incentives for individual retirement accounts, extended IRA's to participants in employer-sponsored pension programs, and doubled maximum Keogh contributions. Further tax breaks for savers will be coming up in 1985, when 15 percent of interest income, up to $450 for single taxpayers and $900 for married couples, can be excluded from taxes.
Taken together, this is the most sweeping program of incentives ever passed to help American families and give them real hope for their future. But just as our program is beginning to mesh and deliver what we promised, with personal savings and spending up, productivity up, auto and steel production and housing construction all recovering, workers being called back, the stock market hitting an all-time high, and consumer confidence surging—just as the recovery is gaining strength—a plan is afoot that would wreck the progress we've made.
For all of you who've worked hard to meet your tax obligations this year, be on guard. The liberal Democrats in the House of Representatives want you to pay more-much more. They want to increase taxes on median-income families by $3,550 over the next 5 years. Nothing could be more unfair. And I promise you this: I will veto any attempt to take away the third year of your tax cut or the indexing which benefit low and medium-income families the most.
But a recent special report put out by the Democratic study group makes plain they are considering many other options to raise your taxes. You should know that these options include capping mortgage interest deductions, eliminating deductions for State and local taxes—in other words, you'd pay a tax on a tax—limiting charitable contributions for nonitemizers, taxing part of the capital gains on home sales, taxing fringe benefits, and on and on and on.
The liberal Democratic tax policy seems to boil down to this: America makes, Government takes. The fallacy of this approach was well understood by a visionary Democrat, President John F. Kennedy, who said in 1963, "The largest single barrier to full employment and to a higher rate of economic growth is the heavy drag of Federal income taxes on private purchasing power, initiative, and incentive." His words are just as true today.
We will not reverse our progress in reducing tax rates. We have only begun. Until next week, thanks for listening, and God bless you.
Note: The President spoke at 12:06 p.m. from Camp David, Md.
Ronald Reagan, Radio Address to the Nation on Federal Income Taxes Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/262457