PRESIDENT'S REAGAN'S TAX FAIRNESS PLAN: TALKING POINTS FOR ADMINISTRATION SPOKESMEN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87M00220R000200340048-1
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 6
• Document Creation Date: December 22, 2016
• Document Release Date: January 7, 2010
• Sequence Number: 48
• Publication Date: June 5, 1985
• Content Type: MEMO

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EXECUTIVE SECRETARIAT
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THE WHITE HOUSE ~~~
WASHINGTON
7 JUN 198
1Executive Registry
CABINET AFFAIRS STAFFING MEMORANDUM
Date: June 5, 1985 Number: 175432CA
Due By: --
Subject: President's Reagan's Tax Fairness-Plan: Talking Points for
Administration Spokesmen
ALL CABINET MEMBERS
Vice President
State
Treasury
Defense
Justice
Interior
Agriculture
Commerce
Labor
HHS
HUD
Transportation
Energy
Education
OMB
CIA
UN
U SIR
Chief of Staff
GSA
EPA
NASA
OPM
VA
SBA
Action FYI
/
m/
1:1
^ ^
CEA
CEQ
OSTP
Deaver
Mc Farlane
Svahn
Chew (For WH Staffing)
Executive Secretary for:
CCCT
CCEA
CCFA
CCHR
CCLP
CCMA
CCNRE
The attached is forwarded for your use in general discussions of the
President's tax simplification proposal.
RETURN TO:
Ifred H. Kingon ^ Don Claret'
Cabinet Secretary ^ Tom Gibson
456-2823 ^ Larry Herbolsheimer
(Ground Floor, West Wing)
Associate Director
Office of Cabinet Affairs
456-2800 (Room 129, OEOB)
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WHITE HOUSE TALKING POINTS
June 5,. 1985 _ -
PRESIDENT REAGAN'S TAX FAIRNESS PLAN:
TALKING POINTS FOR ADMINISTRATION SPOKESMEN
Since President Reagan proposed a revolutionary overhaul of
America's federal income tax system last month, momentum for
reform has continued to build:
A Newsweek poll shows that 2 of every 3 Americans
who have heard of the President's plan favor it:
Three of five Americans feel the current tax
system is essentially unfair;
The President's May 28 speech announcing the tax
reform plan generated the second highest favorable
response of any of his nationally broadcast
speeches since 1981;
Clearly, the American people overwhelmingly support tax
fairness. The following update lists some key facts about
the President's proposal, rebutting some common (but
unfounded) criticisms.
Criticism: "The proposal doesn't do much for middle income
taxpayers."
Fact: Middle income taxpayers do very well under the
President s plan:
o While federal tax rates for all income groups would
come down by an average of 7%, middle income families
as a group (those earning between $20,000 and $50,000)
would get an even larger percentage tax reduction --
they would pay an average of 7.2% less in income tax,
o That compares to an average of 5.8% less for a family
income of $50,000 or higher;
o At the lower end of the middle income range, families
would pay on average 8.7% less in federal income taxes
if they earned $20-30,000 and 13.5% less if they earned
$15-20,000;
o A working family of 6 earning $26,000 (and contributing
just $2,000 to an Individual Retirement Account) would
pay only $1,200 in federal income tax -- an effective
rate of just under 5%;
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o More than 3 of every 5 families earning between
$15-20,000 would pay lower federal income taxes (with
most of the rest paying about-the same as now). And
all would benefit from the simplicity of the new
system; '
Criticism: "The rich gain most -- if you're well-to-do, you
do very well."
Fact: the poor are among the biggest gainers:
o The largest percentage tax reduction by far goes to the
lowest income groups:
The poorest Americans (those with family incomes
less than $10,000) get a tax reduction (35.5%)
more than triple the percentage reduction given to
the wealthiest taxpayers;
Families earning from $10,000 to $15,000 get a
percentage tax reduction (22.8%) more than double
that of the wealthiest taxpayers;
o Under the President's plan, virtually all families at
or below the poverty level would be entirely exempted
from paying any federal income tax;
o The earned income tax credit for the working poor would
be raised and indexed to protect against inflation;
o When marginal tax rates are high, it's the wealthy
taxpayers who can afford to hire the high-priced legal
and tax advice to escape taxes through loopholes;
o Lowering those rates and closing the loopholes will
mean less money is hidden in tax shelters and more is
invested in job-producing enterprises -- and it's lower
and middle income workers who stand to gain most from
those new jobs;
o Even a modest tax reduction (coupled with sharply lower
inflation since President Reagan took office) can be a
big help to a poverty-level family's budget, where
every dollar counts;
o With fewer loopholes and tax shelters under the
President's plan, the richest Americans (incomes of
$200,000 and up) would see more of their income subject
to tax while Americans with incomes under $30,000 woulc
see less of their income taxed, thanks to the larger
personal exemptions and standard deduction;
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Criticism: "Big business will probably make out best."
Fact: It's small and new businesses that gain most from the
President's proposals:
o Between 12 and 15 million taxpayers who own small
businesses have all or part of the income from them
taxed at personal, rather than corporate, rates -- so
their small businesses would benefit from the lower
personal rates in the President's plan;
o And the lowered corporate tax rates (maximum rate cut
from 46% to 33%) will benefit all small corporations.
Moreover, there will be graduated rates from 15% to 33%
for small corporations;
o With IRAs more widely available to taxpayers and with
more after-tax income in Americans'-pockets, the supply
of available capital will rise, which will help small
businesses.
o Thanks to the reduction in capital gains tax rates,
small businesses will find it easier to locate sources
of risk capital and entrepreneurs will find it easier
to sell their businesses;
o As for those businesses which previously paid no tax,
the President's plan toughens minimum tax requirements
to make sure all businesses (as well as individuals)
pay their fair share.
Criticisms: The proposal restores the marriage tax penalty,
taxes unemployment compensation and ends the deduction for
state and local taxes -- all of which would hurt families.
Fact: all three proposals are fair:
o As for the "marriage penalty," the increased personal
exemptions and lower rates will in many cases more than
make up for the loss of the two-earner deduction;
o In the case of unemployment benefits, the plan is
supposed to treat equally taxpayers with equal
earnings. An unemployed person earning $15,000 in
benefits should be taxed the same as a working person
earning the same income;
o As for state and local taxes, it simply isn't fair to
make citizens of states where taxes are low subsidize
out of their pockets the high-tax policies of afew
states -- or the few, higher-income itemizers in those
states who use the state and local tax deduction;
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o As for families generally, the benefits -- doubled
personal exemption for every family member, increased
standard deduction, larger allowable IRA contribution
for families. with only one wage-earner, lower rates --
are overwhelming.
Some general points:
o 97 out of every 100 taxpayers would pay a top tax rate
of no more than 25% under the President's plan;
o And no matter how hard an American worked to earn
overtime pay, or how many raises he or she received
over the years, the IRS could never take more than 35'
out of any dollar in a paycheck;
o The President's plan would seek to curb the abuse of
tax avoidance loopholes that's so-widespread it makes
up a vast, untaxed "underground economy" which cheats
honest taxpayers;
o By making the system simpler and fairer, the
President's plan would look to the broader national
interest and a strong economy rather than encouraging
scuffles over tax advantage for this or that group;
o Four of every five taxpayers would end up either better
off or with no change in tax liabilities under the
President's plan.
o By the early 1990s, potentially more than half of all
taxpayers would not have to file tax returns if they
wished.
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