Remarks at the Signing of the Excise Tax Reduction Bill.
Distinguished Members of the Congress, ladies and gentlemen:
This is a bright day for all Americans.
Very shortly I will sign into law a bill that at midnight will lift $1 3/4 billion of onerous taxes from the American economy; that next January will ease the tax burden by a further $1 3/4 billion; that will pay big dividends in lower prices, in more jobs, in more sales, and in more production, not just in this year of 1965, but in 1966 and in many years to come thereafter.
So, this afternoon I want to personally congratulate the entire Congress for its very prompt and its very efficient and effective action on this matter. I asked the Congress on May 17 to reduce excise taxes. They have now completed action on that bill in exactly 32 days.
This is another shining chapter in the legislative record that a great Congress is writing--a new chapter of progress in American life.
The enactment of this bill reflects the confidence of the administration and the Congress that the benefits of excise tax reductions will be passed along to the American consumer. We can expect no less from our competitive business system.
This bill is now our third major tax action in 3 years.
The Revenue Act of 1962 introduced a bold new concept without precedent in American fiscal history--a 7-percent tax credit for business investment in new equipment. It laid the foundation for a sustained advance in business investment.
That uninterrupted advance has brought investment in equipment in the first quarter of 1965 to $38 billion, an increase of 52 percent in 4 years. And it is continuing. It is bringing rich rewards in the modernization of our entire industrial plant, in better products, in more efficient production, in lower costs, and, finally, in hundreds of thousands of new jobs for the working people of America.
Early last year, the Congress, in its wisdom, passed the Revenue Act of 1964. This second major tax reform simplified our income taxes, and made them fairer, and it reduced by $14 billion the taxes that American consumers and businesses owe on their 1965 incomes.
And this bill, which f am signing today, will eliminate an additional $4.7 billion of excise taxes.
The tax actions of 1962, and 1964, and 1965, taken together, are the mark of a vigorous new philosophy in our fiscal affairs.
Through the rigorous and never-ending pruning of waste, we have found the means for new programs already in education, in health, in urban and regional development, in the war on poverty, in large-scale strengthening of social efforts toward a better America, and in many new health programs.
Through a careful concern for private incentives, our tax system now better promotes growth, and efficiency, and opportunity.
And through a prudent control over total expenditures and total revenues, we have supplied consumers and businesses an expanding volume of purchasing power. The use of that growing purchasing power:
--has carried national output to a rate that is currently running in excess of $650 billion--compared with $500 billion in the first quarter of 1961;
--has raised wages and salaries by $76 billion in 4 years;
--has raised corporate profits after taxes by $17 billion;
--has reduced the unemployment rate from 7.1 percent in May 1961 to 4.6 percent in May 1965;
--has created more than 5 1/2 million new jobs in these 4 years.
When we cut taxes last year, there were some who felt that lower taxes could renew an expansion already old by all past standards. They were wrong.
Today that old expansion has surpassed all peacetime records for duration. In its 52d month, it displays today the youthful vigor, the healthy balance, which promises to keep it going as far into the future, as the Secretary of the Treasury said only yesterday, that we can really see.
Others feared that we were squandering the Federal revenues that were needed to reduce our deficit. And they, too, were mistaken.
Our budget has really fared better than most of us had expected.
In January 1964, we estimated a deficit for fiscal year 1964 of $10 billion. It turned out to be $8.2 billion. In January 1965, we expected a deficit of $6.3 billion for fiscal year 1965. It now appears that it will be close to $3.8 billion.
In the 5-year period 1961 to 1966 we expect that Federal revenues will have increased more than in the preceding 6 years-when there were no tax cuts at all.
We have proved that a healthy budget depends on a healthy economy. And all of us--Government officials, managers, employees, and consumers--are determined to keep our economy healthy.
A healthy economy is free of inflation. Over the past 5 years our price stability has been unmatched in the industrial world. The average level of our wholesale prices in May was only 1.7 percent higher than its average in 1958.
So, this price stability has reflected both prudent monetary and fiscal policies and the responsible actions of both labor and management.
In May, the average manufacturing worker earned $4.56 more a week than he did in May of last year. And he was also earning better pensions, and better vacations, and better insurance. Yet because the gains in his union contracts stayed, on the average, within the rise in productivity, average unit labor costs in manufacturing last month were really lower than a year earlier--or lower then they were 4 years earlier.
So, we are counting on management and on labor to continue to act responsibly in setting prices and wages. The Nation both expects and deserves it to act in the national interest.
And this excise tax bill will make its maximum contribution to our economic health only if businesses pass along to the consumers the full amount of the reduction in the tax. And today I urge every manufacturer, and every retailer in this country, to do just that.
I am pleased that the Congress saw fit to leave substantially unchanged my recommendations for excise tax reduction in 1965 and 1966.
The only major change the Congress made was the additional reduction in the automobile tax in later years.
I had recommended a five-point reduction in that tax, and the Congress decided to increase this to nine points.
But by postponing the additional four-point reduction, the Congress allowed time for possible modification if future developments should indicate that that would be desirable.
We in the executive branch will be carefully considering the possible constructive uses that might be made of the 1 percent automobile excise which the Congress decided to retain. This revenue could help to solve such related national problems as automobile safety, air pollution, highway beauty, and the disposal of discarded and abandoned automobiles.
If we should find that the need for these purposes--or the fiscal situation generally-should require retention of more than the x percent tax on automobiles, there will be ample time for the Congress then to consider our recommendations.
When there is again opportunity for tax revision, we hope, in particular, to provide further tax relief to those in our Nation who need it most--those taxpayers who now live in the shadow of poverty.
Tax revision is a job-as all of you congressional leaders know--that is really never finished. Our tax system must be continually geared to the needs of a healthy and a growing economy.
Such an economy provides both the foundation for our national security and for a better life for all of our citizens.
So, to the members of the Senate Finance Committee, and to the members of the House Ways and Means Committee, and to the membership of the two Houses respectively, I say to you, on behalf of a grateful people, you have done your job well.
Note: The President spoke at 4 p.m. in the East Room at the White House.
As enacted, the Excise Tax Reduction Act of 1965 is Public Law 89-44 (79 Stat. 136). For the President's message to Congress of May 17, 1965, requesting the legislation, see Item 255.
Reports to the President on the effect of the excise tax reduction on consumer prices by Gardner Ackley, Chairman of the Council of Economic Advisers, were released by the White House on July 24, August 18, September 22, and November 29 (I Weekly Comp. Pres. Does., pp. 4, 108, 299, 542).
Lyndon B. Johnson, Remarks at the Signing of the Excise Tax Reduction Bill. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/241724