Reagan’s Plan

Every American should welcome the opportunity for tax reform, and should urge his congressional representatives to work toward a realistic revision of the tax system to eliminate the present inequities. There is much that can be corrected. But the entire tax system is not evil and “un-American,” as President Reagan implied in his nationwide television address Tuesday night. Nor, it appears, would the President’s plan correct all the distortions that currently exist in the system.

The President should be commended on his pledge to work with Congress for tax reform. A workable compromise is possible if all parties are willing to give as well as take, and to share the credit.

But if it is to be workable, the emerging reform plan will not have the ability to propel America into a nirvana where everyone gains and no one loses, and where the only result can be enhanced opportunity for all.

In his farewell address, George Washington counseled Americans that there was no such thing as a tax that was not more or less inconvenient and unpleasant. That is as true today as it was in 1796. Also, Washington urged his fellow Americans to cherish the public credit and use it as sparingly as possible.

Unfortunately, the Reagan Administration already has expended considerable public credit on the tax cuts of 1981 that created many of the inequities that now haunt the revenue codes. The nation has been compiling $200-billion-a-year budget deficits in part to pay for the tax cuts, which provided considerable comfort for the wealthy and many large corporations but failed even to offset rising Social Security levies for most lower-income people.

The President’s new tax-reform plan appears to add to the benefits reaped by the most affluent in 1981. According to a White House chart, 63% of those earning $100,000 to $200,000 a year would get a new tax cut; 71% of those earning $200,000 and more also would wind up paying less. Families in the highest brackets would receive an average cut of 10.7%.

Just who would make up for that? It is not yet fully clear. But the Reagan plan certainly is far more generous to business than was the original Treasury plan, which was hailed by many tax experts as a virtual model of fairness. The Treasury proposal would have increased corporate taxes overall by 35%, the Reagan plan by 9%.

Reagan’s plan seems fair and reasonable for those in lower brackets who have suffered dearly from inflation. But his Administration will have to demonstrate that the wealthy and the “special interests” really would be paying their fair share.