Tells Sympathy for ‘Cult of Cheating’ : Reagan on Tax System: ‘It’s Time We Rebelled’

President Reagan, promoting his new tax plan on the 220th anniversary of a historic revolutionary speech here by Patrick Henry, urged “rebellion” against Washington Thursday and expressed sympathy for the “cult of cheating” among American taxpayers.

“It’s not considered bad behavior,” Reagan said of tax cheating and referring to modern American morals. “After all, goes this thinking, what’s immoral about cheating a system that is itself a cheat? That isn’t a sin, it’s a duty.

“Our federal tax system is, in short, utterly impossible, utterly unjust and completely counterproductive. It has earned a rebellion. And it’s time we rebelled.”

The outdoor crowd of several thousand, assembled on a sunny, picture-postcard day, erupted into cheers and applause as the President issued his now-familiar call for “a second American revolution.”

Later Thursday in Oshkosh, Wis., three bare-breasted young women joined a few dozen fully clothed demonstrators in heckling the President during an outdoor speech to several thousand citizens.

One of the women held a placard proclaiming: “Naked, not Nuked.” Another carried a sign reading: “Stop Staring, Join Us!”

“I’m going to raise their taxes,” the President said to laughter.

As he boarded Air Force One later to return to Washington, Reagan told inquiring reporters that he had not seen the bare-breasted women. He paused and added: “I think I’m going to go back.”

In Williamsburg, Reagan seemed to equate his own campaign for tax simplification with the revolutionary cause of Patrick Henry, who on May 30, 1765, dramatically stood in the Virginia House of Burgesses and demanded repeal of the Stamp Act that had recently been imposed on colonists by England.

Henry’s call for “tax reform” prompted immediate cries of “treason,” but his speech helped fuel a revolutionary fervor that culminated 11 years later in the Declaration of Independence.

Speaking on the steps of the colonial Capitol where Henry had spoken, Reagan said the federal income tax is “so rigged, so unfair, that it corrupts otherwise honest people by encouraging them to cheat. . . . The current system just doesn’t work anymore. The underground economy and the cult of cheating prove this is so.”

Reagan recalled that the founding fathers “argued: ‘Why should the fruits of our labors go to the crown across the sea?’ In the same sense, we ask today, why should the fruits of our labors go to the Capitol across the (Potomac) river?”

‘Get . . . Off Our Backs’

The President declared: “Now is the time, in short, to get the federal government off our backs and out of our way.”

Reagan has made a political career out of campaigning against Washington. And at one point in his speech he seemed to sense the irony of his still railing against the federal government when serving in his second term as its chief executive. So he ad-libbed an explanation.

‘Been There Too Long’

“If I sound like I’m talking about government as something else, I am,” he said. “When we who are now there start talking about government as ‘we’ instead of ‘they,’ we’ve been there too long.” The crowd laughed and applauded.

Attacking both Washington and the income tax as symbols of each other will be a key feature of Reagan’s strategy for selling his tax plan, particularly when he travels to middle-class, family-oriented communities far from Washington, culturally if not geographically.

Patrick Henry’s Ghost

Leaving the ghost of Patrick Henry, Reagan flew later to the Main Street world of Sinclair Lewis in Oshkosh.

Speaking at the Winnebago County Courthouse--where he was given a pair of “Oshkosh B’Gosh” overalls--Reagan asked: “Do the people of Oshkosh want our tax system to be complicated and unfair?”

“No,” came the shouted reply.

And after similar rhetorical questions elicited similarly predictable responses, the President asserted: “The answers are just the same every place I know of except for one city--Washington, D.C. Sometimes folks back there are a little slow to catch on. I may need some help.”

Reagan acknowledged in his Williamsburg speech that he also faces a tough sell to the American public.

Expects a Challenge

“I expect it to be challenging,” he said. “It’s a shrewd turn of the American people that, when you announced a plan to help them, they stand back and scrutinize it and approach with the question: ‘Now, how are you going to hurt me this time?’

“But I tell you from the bottom of my being,” he promised, “this is a plan that’s going to help our country by helping every individual in it.”

58% Would Gain

According to the Administration’s own figures, however, 58% of the nation’s taxpayers would come out ahead under the plan, 21% would break even and 21% would lose.

Reagan also campaigned against the federal tax system Thursday as if he were proposing to cut total tax outlays. But his plan is described as “revenue neutral”--neither increasing nor reducing the Treasury’s overall tax take. THE NEW TAX RATE SCHEDULES Under the tax reform package proposed by President Reagan this week, taxpayers would compute their 1986 income taxes according to the following tables: SINGLE RETURNS If your taxable income is

More than: But not more than: $0 $2,900 2,900 18,000 18,000 42,000 42,000 --

More than: You pay: $0 $0 2,900 15% of the amount over $2,900 18,000 $2,265 plus 25% of the amount over $18,000 42,000 $8,265 plus 35% of the amount over $42,000

JOINT RETURNS If your taxable income is

More than: But not more than: $0 $4,000 4,000 29,000 29,000 70,000 70,000 --

More than: You pay: $0 $0 4,000 15% of the amount over $4,000 29,000 $3,750 plus 25% of the amount over $29,000 70,000 $14,000 plus 35% of the amount over $70,000

For example, a single person with taxable income of $30,000 would pay $2,265 plus 25% of the difference between $30,000 and $18,000. Because 25% of $12,000 is $3,000, that taxpayer’s total tax payment would be $5,265.

Taxable income under the Reagan plan would not be exactly comparable to taxable income under current law because of many of the other tax changes proposed by the President.

Source: Treasury Department