Jimmy Carter photo

Tax Reduction and Reform Message to the Congress.

January 20, 1978

To the Congress of the United States:

I recommend that Congress enact a series of proposals that will reform our tax system and provide $25 billion in net tax reductions for individuals and businesses.

Fundamental reform of our tax laws is essential and should begin now. Tax relief and the maintenance of a strong economy are essential as well. The enactment of these proposals will constitute a major step towards sustaining our economic recovery and making our tax system fairer and simpler.


I propose net tax reductions consisting of:

—$17 billion in net income tax cuts for individuals, through across-the-board rate reductions and a new personal credit, focused primarily on low and middle-income taxpayers.

—$6 billion in net income tax cuts for small and large corporations, through reductions in the corporate tax rates and extensions of the investment tax credit.

—$2 billion for elimination of the excise tax on telephone calls and a reduction in the payroll tax for unemployment insurance.

These tax reductions are a central part of the Administration's overall economic strategy, which will rely principally upon growth in the private sector to create the new jobs we need to achieve our high-employment objective. The tax reductions will more than offset the recent increase in social security taxes and will provide the consumer purchasing power and business investment strength we need to keep our economy growing strongly and unemployment moving down.

Together with the programs that I will outline in my Budget Message, these tax cuts should assure that our economy will grow at a 4 1/2 to 5 percent pace through 1979, with unemployment declining to between 5 1/2 and 6 percent by the end of 1979. Without the tax cuts, economic growth would slow markedly toward the end of 1978 and fall to about 3 1/2 percent in 1979. Unemployment would be unlikely to fall below 6 percent and, by the end of 1979, might be moving upward.

This tax program will mean up to one million additional jobs for American workers. It should lead to a pattern of economic growth which is steady, sustainable, and noninflationary.

In addition, I believe that our taxpayers, particularly those in the low and middle-income brackets, deserve significant tax relief—I am determined to reduce Federal taxes and expenditures as a share of our Gross National Product.


The $25 billion in tax reductions are net reductions, alter taking account of $9 billion in revenue-raising reforms which I am also proposing. Indeed, the full cuts in personal and corporate tax rates which I recommend would not be desirable in the absence of significant reform.

But these reforms stand on their own merits and would be long overdue even if I were not proposing any net tax reductions to accompany them. They focus on simplification for the individual taxpayer and the elimination of some of the most glaring tax preferences and loopholes.

Guided by the need for tax simplification and tax equity, I propose that Congress adopt reforms that would:

—Sharply curtail tax shelters.

—Eliminate the deductions claimed by businesses for theater and sporting tickets, yachts, hunting lodges, club dues, and first-class airfare and limit the deduction for the cost of meals to 50 percent.

—Provide a taxable bond option for local governments and modify the tax treatment of industrial development bonds.

—Strengthen the minimum tax on items of preference income for individuals.

—Repeal the special alternative tax on capital gains, which only benefits individuals in the highest tax brackets.

—Replace the personal exemption and general tax credits with a $240 per person credit.

—Simplify return preparation and record keeping by:

• eliminating the deductions for sales, personal property, gasoline, and miscellaneous taxes;

• combining the separate medical and casualty deductions and allowing them only to the extent they exceed 10 percent of adjusted gross income;

• repealing the deduction for political contributions but retaining the credit; and

• liberalizing .and modifying the Subchapter S and depreciation rules applicable to small businesses.

—Include unemployment compensation benefits in the taxable income of taxpayers above certain income levels.

—Ensure that the tax preferences available for fringe benefits assist rank-and-file workers as well as executive officers.

—Eliminate the special bad debt deduction for commercial banks, reduce the bad debt deduction available to savings and loan associations, and remove the tax exemption for credit unions.

—Phase out the tax subsidies for Domestic International Sales Corporations (DISCs) and the deferral of tax on foreign profits.

These reforms will make our tax system both fairer and simpler. Many of them are targeted at tax preferences and subsidies for activities that do not deserve special treatment and that largely benefit those who have no need for financial assistance. The average working man and woman pay for the loopholes .and the special provisions in our tax laws—because when some do not pay their fair share, the majority must pay higher taxes to make up the difference.

Low and middle-income workers, struggling to make ends meet, are discouraged by tax laws that permit a few individuals to live extravagantly at the expense of government tax revenues. The privileged few are being subsidized by the rest of the taxpaying public when they routinely deduct the cost of country club dues, hunting lodges, elegant meals, theater and sports tickets, and night club shows. But the average worker's rare "night on the town" is paid for out of his own pocket with after-tax dollars.

Likewise, individuals who pay taxes on nearly every penny of earnings are treated unfairly compared to the few who are able to "shelter" their high incomes from taxes. Some persons with incomes exceeding $200,000 have little or no tax liability, while other high-income individuals return to the Federal government nearly 60 cents of every dollar received. There is no good reason for next-door neighbors, in the same economic circumstances, to have vastly different tax bills because one has found tax shelters and loopholes.

In addition to the preferences for expense account items and tax shelter activities, there are a number of equally inappropriate and inefficient corporate tax subsidies. For example, there is no justification for the DISC export subsidy under which we pay over $1 billion a year in foregone tax revenue (mostly to our largest corporations) to encourage our firms to do what they would do anyway—export to profitable foreign markets. Nor can we rationalize proposals to reduce business taxes to increase investment at home while the deferral subsidy encourages multinational corporations to invest overseas by letting them pay lower taxes on their foreign profits than they pay on money earned in the United States.

I ask Congress to join with me to end these unwarranted subsidies and return the revenue to the vast majority of our taxpayers who want no more or less than to pay their fair share.

The tax reforms and tax reductions which I am proposing have been carefully balanced to coordinate with our overall economic and budgetary strategy. Large tax reductions are premised on substantial reforms.

I must, therefore, caution that fiscal prudence will require significantly reduced tax cuts for low and middle-income taxpayers if we cannot help finance the reductions I have proposed through enactment of these revenue-raising reforms. I am proposing a balanced tax program, and I urge Congress to consider these recommendations as an integrated package.


Under this tax program, virtually all Americans will receive substantial tax relief, principally through a simple, across-the-board reduction in personal tax rates. Lower withholding rates will be put into effect October 1, 1978, and taxpayers will experience an increase in take-home pay and purchasing power as of that date.

The typical taxpayer in all income classes up to $100,000 will pay lower taxes. But the bulk of relief has been targeted to low and middle-income taxpayers.

The $240 credit will be especially beneficial for low and middle-income families. It will remove millions of Americans at or near the poverty level from the income tax rolls. No longer will the tax savings for dependents be worth more to high income than low income families. Instead, the credit will be worth just as much to the moderate income blue-collar worker as to the wealthy executive.

Over 94 percent of the net individual tax relief will be provided to individuals and families earning less than $30,000 per year, and every income class up to $30,000 will bear a smaller share of the overall tax burden than it does now. (See Table 4.) Under my proposals, the typical family of four that earns $15,000 a year will save almost $260, a 19 percent tax reduction.

For most persons in the low and middle-income brackets, there will be a sizeable net reduction in combined income and payroll taxes even after the scheduled social security tax increases are taken into account. (See Table 10.) Without this cut in income taxes, the social security tax increases would cause a reduction in the take-home pay of American workers. With this tax program, we will have restored the integrity of the Social Security system-returning that system to a sound financial basis and assuring the stability of future benefits for retired workers—without increasing total taxes for most working people or causing a slowdown in our economic recovery.

We must also act to ease the burdens of tax return preparation and record keeping. We have a tax system that requires millions of individuals to compute their own tax liability. The government relies upon the good faith and conscientiousness of our taxpayers to an extent unparalleled in the rest of the world. But in order for our system to remain successful, it must be comprehensible to the average taxpayer.

Judged by this standard, the current tax structure is seriously defective. Millions of honest and intelligent Americans find themselves confused and frustrated by its complexity. The cost of this complexity is enormous in terms of hours and dollars spent.

Accordingly, tax simplification has been a goal of this Administration from the outset. The tax return individuals will file between now and April 15 has been simplified as a result of the Tax Reduction and Simplification Act which I proposed and Congress enacted last year. The short form 1040A has been reduced from 25 lines to 15 lines. Form 1040 has been restructured so that it can be completed more systematically. Tax tables have been revised to reduce arithmetic computations. The language of the tax forms and the instructions has been made more understandable.

The simplification efforts that were begun in 1977 will be continued and expanded in the tax program I am presenting today. The replacement of the existing personal exemption and general tax credits by the $240 personal credit will simplify return preparation for taxpayers and enable millions of individuals at or below the poverty level to file no tax return. Changes in itemized deductions (which will be more than offset by the rate cuts) will increase the number of non-itemizers to 84 percent of all taxpayers. Six million Americans will be able to switch to the standard deduction and avoid keeping detailed records for tax purposes. The preparation of returns by itemizers will be simplified, and the tax program will reduce record keeping burdens on small businesses.


Our Nation's employment and anti-inflation goals cannot be met without a strengthening of private business investment. In recent years, capital spending in the United States has been inadequate. Capacity growth in manufacturing has declined from a growth rate of about 4.5 percent during the period 1948-1969, to 3.5 percent from 1969-1973, and to 3 percent from 1973-1976. Real business fixed investment in the third quarter of 1977 was 5 percent below its 1974 peak.

In order to encourage needed capital outlays in the period ahead, my tax program contains annual net business tax reductions of approximately $6 billion. The corporate tax rate will be reduced on October 1, 1978 from 20 percent to 18 percent on the first $25,000 of income and from 22 percent to 20 percent on the second $25,000—this will result in a 10 percent reduction in tax liability for most small corporations. The tax rate for large corporations will be cut from 48 percent to 45 percent on October 1, 1978 and to 44 percent on January 1, 1980.

I also recommend several important changes in the existing 10 percent investment tax credit: the 10 percent credit should be made permanent; liberalized to cover up to 90 percent of tax liability; made fully applicable to qualified pollution control facilities: and extended to investments in industrial and utility structures (including rehabilitation of existing structures). These changes should be particularly beneficial to developing businesses that are seeking to expand their productive facilities and should help to increase expenditures for the construction of new factories.

The corporate rate reductions and extensions of the investment tax credit which I am proposing will encourage capital formation by providing an immediate increase in cash flow to business and by enhancing the after-tax rewards of investment.

All small businesses will receive significant cuts in their tax rates under my program: reducing the bottom as well as the top corporate rates will be of special benefit to small corporations; small business proprietorships and partnerships will benefit from the individual rate cuts. In addition to these tax reductions, my program will simplify the depreciation rules applicable to small business and liberalize the provisions governing the deductions of losses on stock held in small companies.

Vigorous business investment will help ease inflationary pressure by averting capacity shortages that might otherwise occur as our economy continues to grow. The $2 billion reduction in telephone excise taxes and employer payroll taxes should provide additional relief from inflation by reducing costs and prices. These tax measures, applied in conjunction with other anti-inflation policies announced in my Economic Report, will support the objective of reducing and containing the rate of inflation.

The combination of these tax cuts and needed business tax reforms will result in a tax system that meets the needs of the broad spectrum of U.S. businesses more efficiently and equitably.

A detailed description of my program follows.


Tax Reductions for Individuals

Individual taxes will be reduced through across-the-board rate cuts and substitution of a single $240 personal credit for the existing personal exemption and alternative general credits. This tax relief will be reflected in decreased withholding rates for employees as of October 1, 1978.

The tax reductions I am now recommending do not include adjustments for Congressional action on the National Energy Plan. In April, I proposed that Congress pass the crude oil equalization tax and rebate the proceeds to the American people on a per capita basis. This course is essential if we are to protect the real incomes of consumers. If the final energy bill includes a full rebate of the net proceeds of the crude oil tax, no further action on my part will be required. However, if the final bill contains a rebate provision only for 1978—as provided in the House version—I intend to send a supplemental message to Congress recommending that the individual tax reductions proposed in this Message be increased by the net proceeds of the crude oil tax.

(1) Rate Cuts. The proposed rate schedule will range from a lowest bracket of 12 percent to a top bracket of 68 percent, compared with the current 14 to 70 percent range. As under current law, the top rate bracket will apply with respect to income in excess of $200,000 for joint returns and $100,000 for single returns. The entire schedules are set forth in Tables 11 and 12. This new rate structure will, in and of itself, increase the overall progressivity of the individual income tax because the cuts are proportionately larger in the low and middle-income brackets.

(2) Per Capita Tax Credit. The tax benefits for dependents currently favor the wealthy over persons with modest incomes. A taxpayer is now entitled to a $750 exemption for each family member in addition to a general tax credit, which is equal to the greater of $35 per family member or 2 percent of the first $9,000 of taxable income. The net effect of the complicated series of exemptions and credits is this: a family of four in the 50 percent tax bracket enjoys a tax savings of $1,680 for dependents while families earning $10,000 save about one-third of that amount.

I propose that the existing exemption and general credits be replaced with a single credit of $240 per family member. Unlike the current structure, the new credit will provide the same benefit at all income levels; for a family with four members, the per capita credit will be worth $960 whether that family is middle class or wealthy. The $240 credit will ensure that most families at or near the poverty level will pay no taxes. Also, a single tax credit will simplify tax return preparation by eliminating the confusion caused by the existing combination of exemptions and alternative credits.

Changes in Itemized Deductions

The primary source of complexity in the tax laws for many middle-income individuals is itemized deductions. Average taxpayers have to maintain burdensome records in order to substantiate the deductions and are required to decipher complex tax rules to complete their tax returns. Restructuring of itemized deductions is essential if the tax laws are to be simplified for typical, middle-class individuals and families.

I am recommending changes in itemized deductions that will enable approximately 6 million taxpayers to switch to the simple standard deduction. The number of taxpayers who use the standard deduction will be increased from 77 percent to 84 percent. And the calculation of the deductions for itemizers will be simplified greatly.

The deductions that will be curtailed are ones that add complexity and inequity to the tax system without advancing significant objectives of public policy. We will have a simpler, more efficient tax system if we eliminate these deductions and return the revenue directly to taxpayers through the rate cuts I propose.

(1) State and Local Taxes. The special deduction will be eliminated for general sales taxes, taxes on personal property (but not on residences or buildings), gasoline taxes, and miscellaneous taxes. These itemized deductions are claimed at nearly uniform rates by all itemizers and result in a relatively small tax benefit. For those taxpayers who do not use the published deduction tables, the record keeping burden can be substantial.

Moreover, a deduction for these types of taxes cannot be defended on public policy grounds. A deduction for gasoline taxes runs counter to our national effort to conserve energy. And the present level of State sales taxes cannot be said to depend upon the fact that those State taxes are deductible for Federal income tax purposes.

(2) Political Contributions Deduction. Political contributions are now deductible as an itemized deduction in an amount not exceeding $200 for a joint return. Alternatively, a taxpayer may claim a credit against his tax for one-half of his political contributions, with a maximum credit of $50 on a joint return.

The reform program will repeal the political contribution deduction but retain the credit. The deduction is undesirable because it provides a larger subsidy to high-bracket contributors. Due to the present deduction, the wealthiest individuals can contribute $200 at an after-tax cost to them of only $60; middle-income Americans incur a cost of $150 for the same contribution. Elimination of the deduction will enhance tax equity and diminish the confusing complexity of the current scheme of deductions and credits.

(3) Medical and Casualty Deductions. The medical expense deduction is one of the most complicated items on the tax forms. Currently, one-half of the first $300 of health insurance premiums is deductible outright for those who itemize. Other medical expenses (including additional health insurance premiums) are deductible to the extent they are in excess of 3 percent of adjusted gross income. The latter category of deductibility also includes medicines and drugs to the extent they exceed 1 percent of adjusted gross income. And there is a separate deduction for damage to property from a casualty (such as theft or fire) if the loss exceeds $100 and is not reimbursed by insurance.

I recommend substantial simplification of these provisions. The deductions for medical and casualty expenses will be combined, and a new "extraordinary expense" deduction will be available for medical and casualty expenses in excess of 10 percent of adjusted gross income. In the case of casualty losses, the excess over $100 will be included in this computation. Medical insurance premiums and medicines will be treated the same as other medical expenses.

Medical and casualty expenditures should properly be deductible only when they are unusually large and have a significant impact on the taxpayer's ability to pay. The medical expense deduction originally met that standard. But, as a result of the changing relationship between medical costs and income, that standard is no longer satisfied. Substantial record keeping burdens and administrative problems can be eliminated through the proposed simplification of the deduction and the redefinition of "extraordinary" in the light of current experience among taxpayers.


Entertainment and Other Expenditures for Personal Consumption

One feature of the current tax system that is most disheartening to average taxpayers is the favorable tax treatment accorded extravagant entertainment expenses that are claimed to be business-related. Some individuals are able to deduct expenditures that provide personal enjoyment with little or no business benefit. And, even where entertainment expenditures may have some relationship to the production of income, they provide untaxed personal benefits to the participants. More than $2 billion of tax revenue is lost every year through these tax preferences.

For example, one person claimed a deduction of $17,000 for the cost of entertaining other members of his profession at his home, at a country club, at sporting events, at restaurants, and at a rental cottage. Another individual wrote off the cost of business lunches 338 days of the year at an average cost far exceeding $20 for each lunch. But there is no deduction in the tax laws for the factory worker's ticket to a football game or the secretary's lunch with fellow workers.

These special tax advantages for the privileged few undermine confidence in our Nation's tax system. The disparity must be eliminated by denying a deduction for expenditures to the extent they provide the participants with such untaxed personal enjoyment and Benefits.

(1) Theater and Sporting Events. No deduction will be permitted for purchases of tickets to theater and sporting events. Present law, by allowing a deduction for the purchase of such tickets, provides a "two for the price of one" bargain to some taxpayers. As long as an individual is in the 50 percent tax bracket or above, he may be able to invite a business friend at no cost to himself by having the Federal government pay for at least one-half of the total ticket costs. The overwhelming majority of our citizens pay for their theater and sports tickets out of their own after-tax dollars. No taxpayer should be asked to help subsidize someone else's personal entertainment.

(2) Other Entertainment Expenses. The tax reform program will also deny deductibility of any expenses of maintaining facilities such as yachts, hunting lodges and swimming pools and for fees paid to social, athletic, or sporting clubs. During a recent tax year, one small corporation deducted $67,000 for yacht expenses incurred in entertaining customers and potential customers on cruises and fishing trips. Another small company deducts over $100,000 a year to maintain hunting and fishing lodges to entertain employees of customers. Asking taxpayers to subsidize these kinds of activities for a tiny minority of our citizens strikes at the fairness and integrity of the tax system.

(3) Business Meals. Fifty percent of currently deductible business entertainment expenses for food and beverages will remain deductible, and 50 percent will be disallowed. A substantial portion of business meal expenses represents the cost of personal consumption that must be incurred regardless of the business connection. The millions of Americans who work on farms, in factories and in offices should not be required to provide their tax dollars to support the high-priced lunches and dinners of a relatively small number of taxpayers. The 50 percent disallowance represents a reasonable and fair approach to compensate for the untaxed personal benefit involved.

(4) Foreign Conventions. Many professional, business, and trade organizations can furnish their members with tax-deductible foreign vacations. The method of conferring such tax-subsidized luxury is to sponsor a foreign convention or seminar. A brochure for one professional organization provides the appropriate atmosphere in promoting its foreign seminars: "Decide where you would like to go this year: Rome. The Alps. The Holy Land. Paris and London. The Orient. Cruise the Rhine River or the Mediterranean. Visit the islands in the Caribbean. Delight in the art treasures of Florence."

The Tax Reform Act of 1976 placed some limits on the deductibility of foreign convention expenses. But the rules still permit taxpayers to take two foreign vacations a year partially at public expense-an exception that did not escape the attention of the organization whose 1977 brochure I have quoted.

I am proposing that the deductibility rules for foreign conventions be modified in a manner that will curb abuses while relaxing the current restrictions on conventions held in foreign countries for legitimate, business purposes. The two convention rule will be stricken. In its place will be a rule that denies deductibility for foreign convention expenses unless factors such as the purpose and membership of the sponsor make it as reasonable to hold the convention outside the United States and possessions as within.

(5) First Class Air Fare. Another example of public support for private extravagance is the deductibility of first class air fare. Business travel constitutes a legitimate cost of producing income. However, the business purpose is served by purchasing a ticket at coach fare. The undue generosity of a deduction for first class air fare was recognized by Congress in 1976 when a deduction was denied for first class flights to foreign conventions. I propose that the rule be extended to tickets for domestic business travel.

Tax Shelters

Through tax shelters, persons can use "paper" losses to reduce taxes on high incomes from other sources. These shelter devices can slash the effective tax rate for many affluent individuals far below that of average income Americans. Moreover, such shelters attract investment dollars away from profit-seeking businesses and into ventures designed only for tax write-offs; legitimate businesses suffer competitive disadvantages as a result.

In the Tax Reform Act of 1976, Congress enacted reforms intended to restrict tax shelter abuses. The principal methods used in that legislation were revisions of the minimum tax and the adoption of an "at risk" rule to limit the deductibility of certain tax shelter losses.

However, some promoters have now adapted their operations to provide shelters in forms that were not specifically covered by the 1976 Act. In fact, shelter activity in 1977 may have surpassed the level reached in 1976. Form letters, addressed to "All of Us Who Wish to Reduce Our Taxes," boldly promise tax write-offs several times larger than the amount invested, and persons are urged to pass the message along "to anyone you think may have interest in tax reduction." Tax shelter experts promote their services in large and expensive advertisements in the financial sections of our Sunday papers.

Such flagrant manipulation of the tax laws should not be tolerated. I recommend action that will build upon the 1976 reforms and further reduce tax shelter abuses.

(1) Strengthening of the Minimum Tax. The minimum tax has proved to be one of the most useful devices to limit the attractiveness of tax shelter schemes, and it should be made still more effective. In its current form, the minimum tax is imposed at a rate of 15 percent on the amount of certain tax preference items enjoyed by a taxpayer. But the total amount of tax preferences can be reduced by the greater of $10,000 or one-half of regular tax liability (in the case of individuals) before the minimum tax is applied.

I recommend that the minimum tax for individuals be strengthened by eliminating the offset of one-half of regular tax liability against preference income. This change will make the minimum tax more progressive and a more sharply focused deterrent to the use of tax shelters. Persons making excessive use of preferences will be taxed on their preference income without regard to regular tax liability. On the other hand, those individuals with modest preference income will still be totally exempted from the minimum tax by the $10,000 preference offset, and the minimum tax will not be applied to capital gain realized on the sale of a personal residence. Ninety-eight percent of the $284 million in revenue raised by this proposal will come from taxpayers with incomes exceeding $100,000 and more than 77 percent will come from the income class over $200,000.

(2) Extension of "at risk" Rule. One of the 1976 reforms that should be toughened is the "at risk" rule. That rule denies deductibility for a shelter investor's paper losses that exceed his cash investment and indebtedness for which he has personal liability. My tax reform plan will generally extend the "at risk" provisions to cover all activities (except real estate) carried on individually, through partnerships, or by corporations controlled by five or fewer persons.

(3) Changes in Real Estate Depreciation. Reform of real estate depreciation practices is needed to reduce much of the wasteful tax shelter investment that has led to overbuilding of commercial real estate in such forms as shopping centers and office buildings. Real estate shelters were left virtually untouched by the 1976 Act. Consequently, these shelters have continued to thrive.

It is time to move depreciation for tax purposes more closely into line with a measurement of actual economic decline. The reform program will generally require taxpayers to base their depreciation for buildings on the straight-line method, using the present average tax lives claimed by taxpayers for different classes of property. Exceptions from the general rule will be granted until 1983 for new multifamily housing, which will be permitted to use a 150 percent declining balance method; new low-income housing will remain eligible for a 200 percent declining balance method until 1983, and for 150 percent thereafter. Needed investment in industrial plants will be encouraged by an extension of the investment credit, as explained below. The investment credit is a more efficient and straight-forward means to provide a tax subsidy for such construction.

(4) Taxation of Deferred Annuities. Another flourishing tax shelter gimmick is the deferred annuity contract. Currently, a person can generally invest in an annuity contract and postpone taxation on the interest build-up until the annuity is actually received. Although originally designed primarily to provide a safe flow of retirement income, the deferred annuity contract is now used commonly as a convenient tax dodge for a wide range of investment opportunities. The shelter benefits are aptly described by the promotional literature:

"How To Postpone Taxes Legally And Earn Interest On Uncle Sam's Money

........With An Investment That Never Goes Down, Always Goes Up, And Is Guaranteed Against Loss."

I recommend that this tax abuse be eliminated. Under my proposal, the earnings of most deferred annuities will be taxed currently to the purchaser. However, in order that an individual may still use a deferred annuity with guaranteed interest as a means to provide retirement income, the proposal will allow each person to designate a single contract, contributions to which may not exceed $1,000 annually, as a contract that will remain eligible for tax deferral. Also unaffected will be the tax treatment of qualified employee annuities.

(5) Classification of Nominal Partnerships as Corporations for Tax Purposes. In many cases, tax shelter schemes can offer the desired tax benefits to investors only if the shelter vehicle is organized as a partnership rather than a corporation. At the same time, limited partnerships can now provide traditional non-tax attributes of a corporation, such as limited personal liability, centralized management, and transferability of interests without sacrificing partnership tax benefits.

Promoters should not obtain the nontax attributes of a corporation for their shelters while using technicalities to avoid corporate tax treatment. I recommend that new limited partnerships with more than 15 limited partners be treated as corporations for tax purposes; however, partnerships engaged primarily in housing activities will be excepted from this classification rule.

(6) Tax Audit of Partnerships. Tax shelter partnerships are not themselves subject to the tax assessment mechanism of the Internal Revenue Service; therefore, each individual partner must be audited separately even though the same substantive determinations may be involved. I recommend that legislation be enacted to permit a partnership to be treated as an entity for the purpose of determining tax issues. Tax shelters based on illegitimate deductions should not be permitted to succeed merely because of the difficulties involved in conducting an IRS examination of their activities.

Termination of Alternative Tax for Capital Gains

The wages of most workers are fully subject to tax at the rates contained in the published tax tables. But persons whose income arises from the sale of assets such as stock or land generally receive preferred treatment; a deduction for long-term capital gains has the effect of taxing these gains at a rate that is one-half of the rate for ordinary income. This preference results in an annual revenue loss to the Treasury of $8 billion.

Taxpayers in the highest income brackets are granted an additional tax preference over and above the special capital gains deduction. Individuals above the 50 percent tax bracket can take advantage of a 25 percent tax ceiling on the first $50,000 of capital gains, a provision known as the "alternative tax." The benefits of this provision go exclusively to persons with taxable incomes exceeding $52,000 (if filing a joint return) or $38,000 (if filing a single return)—less than one percent of all taxpayers.

Through the alternative tax, a wealthy investor can shield nearly 65 percent of his capital gains from taxation—a benefit that is grossly inequitable when middle-class investors are taxed on one-half of such gains, and most workers are taxed on every cent of their wages and salaries. The alternative tax costs the Treasury over $100 million every year, almost 90 percent of which goes to taxpayers in income classes above $100,000. I propose the repeal of this unfair and complicated tax benefit.

Fringe Benefits Unavailable to Rank-and-File Workers

Our tax system generally operates under the principle that employees should be taxed on their compensation no matter what form that compensation assumes. A worker who receives cash wages that he uses to provide benefits for his family should not ordinarily be taxed more heavily than the employee who receives those benefits directly from his employer. There are now exceptions to this general rule for certain types of employee benefits. I urge Congress to act so that these tax preferences benefit rank-and-file workers as well as the executive officers.

(1) Non-discrimination Requirement for Health and Group Life Plans. An example of a tax-preferred employee benefit is a health or group life insurance plan. If an individual purchases medical insurance, the premiums are deductible only within the limits applicable to the medical expense deduction. However, if an employer establishes a medical insurance program for its employees, the premium payments by the employer are deductible while neither the premiums nor the benefits are taxable to the employee.

Although this tax preference was designed in theory to secure basic protections for a wide range of employees, it often serves instead to subsidize expenses of only the high-level corporate managers. It is now possible for a businessman, through his controlled corporation, to establish a health plan that covers only one employee—himself—and permits all of his medical and dental expenses to be deducted. Meanwhile, that corporation's other employees have to provide health care for their families with nondeductible expenditures.

To curb this abuse, I recommend denial of the tax exemption for employer-established medical, disability, and group life insurance plans if those plans discriminate in favor of officers, shareholders, and higher-paid employees. Preferential tax treatment is now available to pension plans only if non-discrimination standards are met. The tax law should require similar non-discriminatory treatment for workers in the case of medical, disability, and group life insurance plans.

(2) Employee Death Benefits. Current law provides an exclusion for the first $5,000 of payments made by an employer on account of the death of an employee. I recommend the repeal of this exclusion. Typically, these death benefits are in the nature of deferred wages that would have been paid to employees in high tax brackets. Adequate tax relief for an employee's heirs is provided through a complete tax exemption for insurance proceeds.

(3) Integration of Qualified Retirement Plans and Social Security. Certain employer-sponsored retirement plans have a preferred tax status. Employer contributions to a qualified plan are currently deductible while the employee can defer taxation until retirement benefits are received. Although qualification for this special treatment is generally dependent upon non-discriminatory coverage of employees, the tax laws now permit a qualified plan to cover only employees who earn amounts exceeding the social security wage base-a base that will rise to $25,900 by 1980 under the recently enacted social security financing legislation.

It is unfair to grant tax preferences for private pension plans that bar all low and middle-income employees from participation. I propose that a new integration formula be enacted so that a qualified pension plan cannot provide benefits to supplement social security for highly compensated employees unless all employees receive some coverage under the plan.

Unemployment Compensation

Unemployment compensation is a substitute for wages that generally provides needed relief to persons in financial distress. But, in some cases, the unemployment compensation system discourages work for taxable income. Since unemployment benefits are tax-free, they are more valuable than an equivalent amount of wages. This means that if two individuals have the same total income, the one who remains idle several months and receives unemployment compensation will be better off financially than his colleague who works the whole year. There can be no justification for conferring this tax-free benefit upon middle and upper-income workers.

I propose that the current tax exemption for unemployment compensation benefits be phased out as an individual's income rises above $20,000 for single persons or $25,000 for married couples.

Taxable Bond Option and Industrial Development Bonds

Present law exempts from Federal taxation the interest on certain bonds issued by state and local governments. There are now two general categories of tax-exempt bonds: obligations issued for the benefit of the state and local government itself, and industrial development bonds issued by the government to provide facilities such as pollution control equipment, sports facilities, waste disposal facilities, industrial parks, and facilities (including hospitals) of private, non-profit organizations. Also, there is a "small issue" exemption for certain industrial development bonds with face amounts that do not exceed $1 million, or $5 million where the total cost of capital expenditures on the financed facility does not exceed the $5 million amount.

My tax program preserves the freedom of state and local governments to issue tax-exempt bonds. I am recommending reforms that will restrict the tax avoidance opportunities available to the wealthy in the tax-exempt market while, at the same time, increasing the ability of state and local governments to obtain lowcost financing. In particular, I propose the following:

(1) Option for Bonds Benefitting Governmental Units. State and local governments will be given the option of continuing to issue tax-exempt bonds or issuing fully taxable bonds, accompanied by a direct Federal interest subsidy to the governmental units. For bonds issued in 1979 and 1980, the subsidy will be equal to 35 percent of the interest cost; the subsidy will rise to 40 percent for bonds issued after 1980. The Federal government will exercise no control over the purposes for which state and local governments use subsidized financing. State and local governments will benefit under the taxable bond option regardless of whether they decide to issue taxable or tax-exempt bonds: those issuing taxable bonds will benefit directly from the interest subsidy, and those continuing to issue tax-exempt bonds will benefit because the reduced supply of such bonds will allow governments to sell them at lower interest rates.

(2) Pollution Control Bonds, Bonds for the Development of Industrial Parks, and Private Hospital Bonds. The tax exemption will be removed for interest on pollution control bonds and bonds for the development of industrial parks. Also, the exemption will be removed for bonds issued to finance construction of hospital facilities for private, non-profit institutions unless there is a certification by the state that a new hospital is needed. These activities are essentially for the benefit of private users, and the tax exemption for the bonds has the effect of undermining the financing of governmental functions. Moreover, the general exemption for hospital bonds encourages excessive expansion of unneeded hospital facilities and runs counter to the Administration's Hospital Cost Containment proposal.

(3) Small Issue Exemption. the existing "small issue" exemptions will be retained only for economically distressed areas; and, with respect to those areas, the $5 million exemption will be raised to $10 million.

(4) Option for Certain Industrial Development Bonds. Industrial development bonds which continue to enjoy tax-exempt status (such as those to finance sports facilities, housing, airports and convention facilities and small issues for economically distressed areas) will be eligible for the taxable bond option on the same terms .as obligations issued for the benefit of state and local governments.

Accrual Accounting for Large Corporate Farms

Most taxpayers that are in the business of selling products must use an accrual method of accounting so that income is reflected accurately for tax purposes. However, farmers have historically been permitted to use the simpler cash method on the grounds that they lack the accounting and bookkeeping expertise required by the accrual system.

Congress acted in 1976 to deny the cash accounting privilege to most large corporate farms (with annual gross receipts exceeding $1 million), but retained an exception for large corporations that are "family owned." This distinction between family and nonfamily corporations bears no relationship to the rationale of preserving simple bookkeeping methods for small farmers. It has resulted in severe competitive imbalances between large corporations now required to use accrual accounting and those that are equally large but happen to fall within the definition of a "family farm."

This inequitable exception should now be eliminated. Corporate farms with gross receipts exceeding $1 million cannot fairly claim that they lack the sophistication necessary to comply with accrual accounting standards. Nor can lack of financial sophistication be claimed by farm syndicates used as investment vehicles by nonfarmers. Therefore, I recommend that the accrual accounting requirement cover corporations with gross receipts greater than $1 million, regardless of their ownership, and all farm syndicates.

Tax Treatment of Financial Institutions

Financial institutions now have a favored tax status that is based largely on outmoded concepts regarding the nature of these businesses. Commercial banks, mutual savings banks and savings and loan associations were permitted to deduct artificially inflated reserves for bad debts in order to protect the banking system from catastrophic losses that were prevalent prior to the extensive banking legislation of the 1930's. Credit unions' were exempted from taxation in the days when these institutions were small entities with close bonds among the members and few powers to provide extensive financial services. I am recommending changes that will recognize the contemporary practices of financial institutions and will bring the tax treatment of commercial banks, savings and loan associations and credit unions more in line with the taxation of other businesses. These reforms will raise $300 million per year in revenue.

(1) Commercial Banks. Commercial banks may now claim bad debt deductions that greatly exceed their actual losses. Under legislation enacted in 1969, this special bad debt deduction is scheduled for elimination after 1987. I propose that the effective date for repeal be accelerated so that beginning in 1979 banks, like other businesses, will base their bad debt reserves on their own experience in the current and 5 preceding years.

(2) Mutual Savings Banks and Savings and Loan Associations. Mutual savings banks and savings and loan associations are also permitted a special bad debt deduction that bears no relationship to actual experience. These thrift institutions are generally entitled to deduct 40 percent of their net income (this percentage is scheduled to apply in 1979) as a bad debt reserve as long as a significant portion of their deposits is invested in real estate loans. My tax program will reduce the percentage to 30 percent over a 5-year period.

(3) Credit Unions. Credit unions are tax-exempt. Yet, their powers and functions are defined so broadly that the term "credit union" can include financial institutions that are functionally identical to a savings and loan association. The tax exemption provides them with an unfair financial advantage over their competitors. I propose that the percentage of exempt income be phased out over a 4-year period, and that credit unions be taxed in the same manner as mutual savings banks and savings and loan associations after 1982.

Domestic International Sales Corporation (DISC),

Business incentives form an integral part of my tax program. I am recommending measures that will encourage American businesses to invest in productive facilities and to create jobs. However, adoption of those incentives must be accompanied by the elimination of tax preferences that have proved to be wasteful. The so-called "DISC" provision is a prime example.

In 1971, Congress enacted a special tax program for exports. This program permitted tax benefits for exports channeled through a company's specially created subsidiary, usually a paper organization, known as a domestic international sales corporation (DISC). Artificial pricing rules on transactions between the parent company and its DISC permit a favorable allocation of export profits to the DISC, and the taxation of one-half of eligible DISC income is deferred as long as these profits are invested in export related assets.

DISC has proved to be a very inefficient and wasteful export subsidy in the current international monetary system. A recent Treasury study indicates that DISC may have contributed only $1 to $3 billion to U.S. exports in 1974—an increase of less than 3 percent in total exports-at a tax revenue cost of $1.2 billion. In the long run, even these increased exports are probably offset by rising imports that result from the operation of the flexible exchange rate system. DISC does nothing for, and may even disadvantage, our import sensitive industries and our exporters not using the DISC provision. Independent experts believe that DISC may have had no positive effect on our balance of payments.

Congress has recognized the wasteful nature of DISC and, in 1976, limited its applicability. However, DISC continues to ,cost U.S. taxpayers over $1 billion per year, with 65 percent of DISC benefits going to corporations with more than $250 million in assets.

I propose the elimination of one-third of DISC benefits in 1979, two-thirds in 1980, and all DISC benefits in 1981 and thereafter.

Foreign Tax Deferral

Domestic corporations can now avoid paying a U.S. tax on the earnings of their foreign subsidiaries as long as those earnings remain overseas. A U.S. tax is generally deferred until dividends are paid by the subsidiary to its domestic parent, and then U.S. tax liability is offset by a tax credit for foreign income taxes paid on those remitted earnings. Fifty percent of all the benefits of tax deferral is obtained by 30 large multinational corporations.

I recommend that this deferral privilege be phased out over a 3-year period. At least one-third of a foreign subsidiary's earnings will be taxed to the U.S. parent in 1979, at least two-thirds in 1980, and all the subsidiary's earnings after 1980. The tax reform program is designed to create incentives for investment in the United States and the creation of jobs for American workers. Tax deferral runs counter to these objectives. By providing a preference for foreign source income, the current deferral provision provides an incentive for investing abroad rather than in the United States, thereby having the effect of reducing job opportunities for Americans. Moreover, deferral can encourage multinational corporations to manipulate internal transfer prices in order to allocate income to low-tax countries.

There is no reason to defer the imposition of a U.S. tax just because business operations are conducted abroad rather than in the United States, regardless of the motivation for creating a foreign subsidiary. Congress eliminated in 1969 certain special tax preferences for businesses conducted in the United States through multi-layered corporations. I propose that Congress act in a similar manner to end the present preference for business operations conducted internationally through such multinational corporate structures.

The foreign tax credit will be retained in its present form. Therefore, elimination of deferral will not result in a double taxation of overseas earnings. And, in the event it appears to be in the national interest to permit tax deferral with respect to specific countries, such treatment can be provided selectively under negotiated tax treaties involving mutual concessions.


I propose two tax reduction measures-outside the income tax system-that will assist our efforts to attain price stability.

Repeal of Excise Tax on Telephone Services

The present 4 percent excise tax on amounts paid for telephone services is now being phased out at the rate of 1 percentage point a year, with full repeal scheduled as of January 1, 1982.

I recommend complete repeal of this tax as of October 1, 1978. This action will reduce the cost of living directly. It will also lower consumer prices indirectly through a reduction of the business cost associated with telephone services.

Federal Unemployment Insurance Tax

I recommend a reduction in the Federal unemployment insurance tax to reduce the payroll costs of employers. On January 1, 1978, the unemployment insurance tax rate rose from 0.5 percent to 0.7 percent of an employer's taxable wage base. This tax increase was instituted in order to replenish general revenue funds that have been loaned to the unemployment insurance trust fund during recent periods of high unemployment. But the issue of unemployment compensation financing requires a thorough reexamination to determine the best means of providing future benefits. To this end, I will soon appoint the National Commission on Unemployment Insurance which the Congress established to make this study and to offer recommendations. In the meantime, I am guided by my concerns about inflation. I propose that the tax rate be reduced to the 0.5 percent level as of January 1, 1979.


Corporate Rate Cut

I recommend a corporate rate cut that will reduce business taxes by $6 billion. Tax relief in this form is sizable, easily understood by taxpayers, and applicable across the board.

The corporate tax rate is now 20 percent on the first $25,000 of income, 22 percent on the next $25,000, and 48 percent on corporate income exceeding $50,000. Effective October 1, 1978, this program will reduce the first two rate brackets to 18 and 20 percent, respectively, and the rate to 45 percent on taxable income in excess of $50,000. The top rate will be reduced an additional point, to 44 percent, on January 1, 1980. Small as well as large corporations will benefit from these rate cuts.

A corporate rate reduction of this magnitude will increase capital formation and help to assure a sustained economic recovery. In recent years, the level of business fixed investment has been unsatisfactory. One of the primary causes of this inadequate investment performance has been the low rate of return businesses receive on their investments—after tax liability is taken into consideration. The lower tax rates I recommend will enhance the anticipated after-tax profits on corporate investment projects and increase cash flow immediately. Businesses will thereby be encouraged to increase capital spending and to create jobs for American workers. Corporate rate cuts this large are made possible by, and depend upon, passage of the revenue-raising business tax reforms I have described earlier.

Liberalization of Investment Tax Credit

The investment tax credit has proven to be one of the most potent tax incentives for capital formation. It provides a direct reduction in tax liability generally equal to 10 percent of a business' qualifying investments. But there are now several limitations that restrict its effectiveness.

I recommend changes that will make the investment credit a stronger, more efficient, .and more equitable incentive. These changes will reduce business taxes by approximately $2.5 billion per year.

(1) Permanent 10 Percent Credit. The present 10 percent investment credit is not a permanent feature of the Internal Revenue Code. On January 1, 1981, the credit level is scheduled to revert to 7 percent. I propose that the credit be extended permanently at a 10 percent rate so that businesses can plan ahead with greater certainty of the tax benefits that will be associated with projected capital expenditures.

(2) Increased Tax Liability Ceiling. The investment credit claimed during any taxable year cannot generally exceed $25,000 plus 50 percent of tax liability in excess of that amount (with excess credits being eligible for a 3-year carryback and a 7-year carry-forward). My tax program will provide a ceiling of 90 percent of tax liability (including the first $25,000) and will thereby increase the incentive for those businesses with relatively high investment needs and low taxable incomes. Developing businesses and firms suffering from temporary business reversals will be helped to compete more effectively with their larger or more stable competitors.

(3) Eligibility of Structures. The investment credit now applies only to machinery and equipment. My tax program will extend eligibility for the credit to utility and industrial structures, where investments have been especially sluggish. Investment in these structures reached its peak over 4 years ago and is now 16 percent below that level. It is important that we act to remedy the existing tax bias against structures and encourage balanced industrial expansion. In order to ensure that this provision has no antiurban bias, I propose that the investment credit be available for both new structures and the rehabilitation of existing structures.

I recommend that this provision apply to construction costs incurred after December 31, 1977. In the case of new structures, there will be an additional requirement that the facility be placed in service after that date.

(4) Liberalized Credit for Pollution Control Facilities. I propose that pollution abatement facilities placed in service after December 31, 1977, be allowed to qualify for a full 10 percent credit even if special 5-year amortization is claimed under the provisions of existing law. Currently, only a 5 percent credit may be combined with rapid amortization. This proposal will provide significant tax relief for industries that are forced to make pollution control expenditures in order to comply with environmental regulations.

Revision and Simplification of Regulations Under the Asset Depreciation Range System

The asset depreciation range (ADR) system provides substantial tax benefits to businesses. Under ADR, generous class lives are prescribed for categories of assets, and a taxpayer can select useful lives for depreciation purposes within a range that extends from 20 percent below to 20 percent above the designated class life. However, certain complexities in the ADR regulations discourage most businesses, especially small ones, from electing this depreciation system and impose administrative burdens on those businesses that do use ADR.

I recommend legislation expressly permitting the Treasury Department to issue regulations that will simplify the ADR system. Included among the changes will be a termination of the annual reporting requirement.

Proposals Focused on Small Business

The tax reductions I recommend will provide significant benefits for small businesses. For example, a small corporation with annual income of $50,000 will save $1,000 in taxes due to corporate rate reductions. For that corporation, tax liability will be reduced by nearly 10 percent. Moreover, those small businesses conducted in partnership or sole proprietorship form will benefit substantially from the rate cuts I have proposed for individuals.

But in addition to providing these general tax incentives, I recommend three proposals designed specifically to assist small businesses. First, my tax program will simplify and liberalize the rules (Subchapter s) that treat certain small corporations as partnerships; the number of permissible shareholders will generally be increased from 10 to 15, and the rules governing subchapter S elections will be made less stringent. Second, a simplified method of depreciation will be authorized for small businesses that will provide tax benefits similar to the current ADR system without complex record keeping requirements. And third, risk-taking will be encouraged by doubling the amount of a small corporation's stock (from $500,000 to $1 million) that can qualify for special ordinary loss treatment and by eliminating several technical requirements that needlessly restrict the ability of small businesses to use this provision.


Enactment of these recommendations will effect major reform of our tax laws, provide significant tax relief, and sustain our economic recovery.

This program will eliminate a number of the inequities that undermine the integrity of the tax system. It will make preparation of returns simpler and more understandable for millions of taxpayers. Prompt passage will strengthen the confidence of consumers and businesses in our growing economy and lead to the creation of up to one million new jobs for workers who need them.

I look forward to working in partnership with Congress to enact this program of tax reform and tax reduction.


The White House,

January 20, 1978.

Table I



[In billions of dollars]

Fiscal years

1979 1980 1981 1982 1983

Individual income tax:

Tax reductions —22.5 —25.7 —29.2 —33.4 —38.5

Tax reforms 4.2 7.4 8.9 10.6 12.3

Net change —18.3 —18.2 —20.3 —22.8 —26.2

Corporation income tax:

Tax reductions —6.3 —9.4 —11.1 —11.8 —12.8

Net change —5.1 —6.5 —6.8 —6.8 —7.6

Telephone excise and unemployment

insurance tax reductions —1.6 —2.0 —1.6 —1.2 —1.1

Total —25.0 —26.6 —28.6 —30.8 —34.9

Table 2


[In millions of dollars]

Full Calendar years


1976 1978 1979 1980 1981 1982 1983

$240 credit and reduced

tax rates —17,305 —6,067 —23,538 —26,583 —30,272 —34,732 —40,110

Itemized deduction


Repeal gasoline tax deductions 582862 983 1, 121 1,277 1,456

Repeal sales tax deductions 1,6722, 477 2, 824 3, 219 3, 670 4, 184

Repeal miscellaneous tax deductions 384569 649 739 843 961

Deduction for medical and

casualty expenses 1,396 1,909 2,119 2, 352 2, 611 2, 898

Repeal political contributions deduction 22 4 2 3 3

Repeal capital gains alternate tax 113140 151 162 174 187

Individual real estate tax shelters 32061 181 296 407 514

Taxation of unemployment benefits 27212 207 204 204 214

Tax interest element of annuity contracts 32012 26 40 57 80

Minimum tax change 229284 306 329 353 380

Taxable bond option (individual) 255197 592 1,080 1,666 2, 218

Extend 10 percent investment tax

credit to structures (indiv.) —36 —47 —54 —65 —73 —79 —86

Limit individual tax credits

to 90 percent of tax before credits 3852 58 64 71 79

Tax qualified retirement plans and employee

death benefits 3032 32 33 33 34

Corporate real estate shelters 18040 118 194 265 335

Corporate family farm accounting 3040 25 10 5 7

Bad debt reserves:

Commercial banks 196227 232 232 23

Mutual savings banks and savings

and loans 8237 85 145 221 316

Credit unions 8222 50 83 123 171

Table 2—Continued

Full Calendar years


1976 1978 1979 1980 1981 1982 1983

Entertainment expenses 1,1251,476 1,633 1,771 1,932 2, 107

Taxable bond option

(corporations) — 24 — 15 — 47 — 79 — 113 — 150

Phase-out DISC over 3

years 852 193 664 1,228 1,513 1,613 1,751

Phase-out deferral of tax on

foreign source income 52388 280 768 830 897

Corporate tax rate reduction —5, 718 — 1,349 —5, 965 —8, 516 —9, 228 —10,010 — 10, 764

At risk limitation (corporations) 1014 10 8 5 6

Increase investment tax

credit limit to 90 percent — 71—882 —576 — 114 — 194 —205

Extend 10 percent invest-

ment tax credit to structures (corporations) — l, 055 — l, 10 — l, 389 — l, 649 — l, 869 —2, 074 —2, 268

Nondiscrimination rule for

health and group term

life plans 2932 33 34 35 '36

Full investment tax credit

for pollution abatement facilities —90 — 142 —93 — 107 — 127 — 115 — 144

Total individual — 11,725 —6, 114 — 16, 783 — 18, 516 —20, 704 —23, 442 —26, 988

Total corporate —3,849 —2,398 —5,70 —7,201 —6,659 —7,454 —7,905

Subtotal tax reform —15,574 —8, 512 —22, 487 —25, 717 —27, 363 —30, 896 —34, 893

Repeal telephone excise tax —355 —1,200 —900 —500

Reduce unemployment

payroll tax rate —850 —900 —950 —1,000 —1,050

Total —15, 574 —8, 867 —24, 537 —27, 517 —28, 813 —31,896 —35, 943

Office of the Secretary of the Treasury, Office of Tax Analysis—January 21, 1978.

Table 3



[Dollars in millions]

Present law Administration proposal

Expanded Number of Expanded

income class returns income Tax Effective Tax Effective

($000) (thousands)liability tax rate liability tax rate


Less than 5 25, 474 $57, 557 $14 0. 2 -$251 —0. 4

5-10 20, 109 149, 590 8, 227 5. 5 6, 368 4. 3

10-15 16, 106 201,036 18, 071 9. 0 15, 361 7. 6

15-20 11,824 205, 086 23, 009 11.2 20, 148 9. 8

20-30 9, 907 237, 041 32, 778 13. 8 29, 593 12. 5

30-50 3, 347 124, 836 22, 017 17. 6 20, 971 16. 8

50-100 985 67, 484 16, 492 24. 4 16, 344 24. 2

100-200 198 27, 371 8, 084 29. 5 8, 261 30. 2

200 and over 49 21,573 6, 476 30. 0 6, 838 31.7

Total 87, 998 1,091,573 135, 293 12. 4 123, 633 11.3

Office of the Secretary of the Treasury, Office of Tax Analysis—January 21, 1978.

Note: The text of the message was released on January 21.

Jimmy Carter, Tax Reduction and Reform Message to the Congress. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/247763

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