Gerald Ford on Tax Reform President of the U.S., 1974-1977; Republican Rep. (MI)

Cutting federal spending justifies tax cuts

FORD: For every dollar of tax reduction we had to have an equal reduction in federal expenditures. With a budget of $395 billion, that would have permitted a $25 billion tax reduction. I recommended a 50% cut in the growth of federal spending. With that limitation, we can fully justify tax reductions. With more money in the hands of the taxpayers, and with more money in the hands of business to expand, to modernize, to provide more jobs, we'll have a more prosperous economy.

CARTER: The present tax structure is a welfare program for the rich. The philosophy of the GOP has been to pile taxes on low-income people and to take them off corporations. Since the late 60s, we've had a reduction in the percentage of taxes paid by corporations from 30% to about 20%. We've had an increase in taxes paid by individuals from 14% to 20%. This is what the Republicans have done and why tax reform is important.

Permanent tax cuts accompanies by spending cuts

I would ask Congress for a permanent tax reduction--the biggest in our history of $28 billion. But I would not sign the tax legislation unless Congress pledged to cut anticipated federal spending by an equivalent $28 billion. That would bring the federal budget down to $395 billion. "If we cut only taxes but do not cut the growth of government spending," I explained, "budget deficits will continue to climb, we will have more inflation, and ultimately we will have more unemployment. Substantial cuts in your taxes must be tied to substantial cuts in growth of government spending."

$16B rebate of personal & corporate taxes, as stimulus

When an economic slowdown occurs, Federal tax collections slow down more than incomes and profits do, and unemployment benefit payments rise sharply. These factors tend to cushion the economic downturn and help sustain individual and corporate incomes.

The Government must act decisively to help restore economic health, and act compassionately to aid those most seriously affected by unemployment. It does not make economic sense to insist on cutting a dollar out of the budget for each dollar of tax receipts lost just because of decreases in incomes and profits resulting from the economic downturn. Nor does it make sense arbitrarily to offset each dollar of increased aid to the unemployed by a reduction elsewhere in the budget.

One-time rebate of $1000 per person & $4B for businesses

I call on the Congress to act by April 1. If you do, the Treasury can send the first check for half of the rebate in May and the second by September.

The other 1/4 of the cut, about $4 billion, will go to business, including farms, to promote expansion and to create more jobs. The 1-year reduction for businesses would be in the form of a liberalized investment tax credit increasing the rate to 12% for all businesses.

This tax cut does not include the more fundamental reforms needed in our tax system. But it points us in the right direction--allowing taxpayers rather than the Government to spend their pay.

Raised taxes to fight inflation