The Overshadowing Issue

The Mono. Lisa was not the only thing being unveiled around Washington. In his State of the Union message, as prepared for delivery to Congress this week, President Kennedy finally took the wraps off his new tax program. It turned out to be quite a package.

The President wanted a cut of no less than $13.5 billion in U.S. income tax rates. Of this, some $11 billion would come by lowering the rates for individual taxpayers. At present those who have taxable incomes of not more than $2,000 a year pay 20%, and those who are in the over $200,000 bracket pay 91%, with intermediate rates between these extremes.

Kennedy's plan would shift this range from 14% for those who report not over $1,000, to a high of 64%. The rest of Kennedy's cut would be produced by lowering the corporate rates by 5%--from the present 52% to 47%.

Only some $5 billion of this tax loss would be offset by the rest of the package. Various closing of tax loopholes and corrections of inequities, which Kennedy did not spell out, would recover $3.5 billion. A shift in the timing of corporate tax payments would yield another $1.5 billion--at least in bookkeeping terms.

Faster Growth. Without going into many specifics on timing, President Kennedy recommended that the reduction be stretched out over three years. He asked the Congress to begin applying the cuts this year. But he did not repeat his earlier contention that a tax reduction should be retroactive to Jan. 1, 1963. Recognizing the legislative tempest that tax reform inevitably raises, he suggested that reforms need not go into effect until next year.

The President based his plea for the tax changes on the premise that the nation should not be satisfied with merely recovering from a recession, that its economy is capable of much faster growth, higher production and bigger profits than it is now experiencing. And he left no doubt on just how he rates this issue in his 1963 legislative program. Said he: "I am convinced that the enactment this year of tax reduction and tax reform overshadows all other domestic problems in this Congress. For we cannot lead for long the cause of peace and freedom if we ever cease to set the pace at home."

This quite clearly placed the priority on his tax plans high above such domestic programs as medical care for the aged, the improvement of mass transportation, aid to education and schemes for aiding the employment of youth. But his State of the Union message made bows to all of these, promised more specific details in later messages to Congress. The President also urged the creation of a domestic Peace Corps--a catch-basin for idealism at home (see EDUCATION).

Sharing the Burdens. In arguing that the U.S. must become stronger at home if it is to meet its commitments abroad, Kennedy could logically repeat his plea to U.S. Allies that they must do more to share the burdens of freedom-- borne so heavily for so long by the U.S. Beyond such sharing, the Western alliance must work toward greater unity, he said, even though he recognized that Allies will always differ in some respects (see following story"). Said Kennedy: "The unity of freedom has never relied on uniformity of opinion."

Kennedy saw at least two hopeful developments on the world scene. One was that the nonaligned nations now view the U.S. more favorably because of its actions in Cuba, the India-China war, the Congo and on disarmament. The other involves the increasing strains in the Communist bloc, where nationalism still persists, and where economic problems seem to be growing. "Here hopes must be tempered with caution," Kennedy said. But he indicated his certainty that Communism can breed only economic stagnation. "A closed society is not open to ideas of progress-- and a police state finds that it can't command the grain to grow."

On balance, the President found that while many things need to be done to improve the State of the Union, there is reason for the U.S. to be encouraged. Concluded Kennedy: "Now the winds of change appear to be flowing more strongly than ever, in the world of Communism as well as our own. For 175 years we have sailed with those winds at our back and with the tides of human freedom in our favor. Today we still welcome those winds of change-- and we have every reason to believe that our tide is running strong."

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