ly adopt this philosophy of action. I firmly believe that we will.

The President on three separate occasions has quite recently placed himself on record in favor of economy in Government spending. This has all been an outgrowth of this tax reduction bill and the section included in it by your committee.

First, there is the letter he sent to me which is reprinted on pages 124 and 125 of the committee report. In this the President states:

First, our long-range goal remains a balanced budget in the balanced full employment economy. It is clear that this goal cannot be achieved without a substantial tax reduction and the greater national income it will produce.

Second, tax reduction must also, therefore, be accompanied by the exercise of an even tighter rein on Government expenditures, limiting outlays to those expenditures which meet strict criteria of national need.

Third, consistent with these policies, as the tax cut becomes fully effective and the economy climbs toward full employment, a substantial part of the increased tax revenues will be applied toward a reduction in the transitional deficits which accompany the initial cut in tax rates.

Fourth, assuming enactment of the tax program incorporated in your committee's bill with a consequent loss of revenue of $5 billion more in fiscal 1965 than in fiscal 1964, I nevertheless expect-in strict accordance with the above policies, and in the absence of any unforeseen slowdown in the economy or any serious international contingency in the next 5 months-to be able to submit next January a budget for fiscal 1965 involving an estimated deficit of less than the $9.2 billion forecast for fiscal 1964 by the Secretary of the Treasury in your executive sessions last week.

Here the President committed himself to preventing expenditure increases from exhausting the additional revenues which arise as the economy expands as a result of the income generated by this tax reduction.

A week ago yesterday, I released a statement much of which I shall repeat in just a moment expressing my philosophy that we should provide a more prosperous economy by loosening the constraints on the private sector of the economy rather by following the policy of increasing Government spending. After I released my statement, the President sent me the following unsolicited letter:

I thought your Monday release in support of the tax bill was excellent. It should be convincing to Members of Congress and I subscribe to it.

Sincerely,

JOHN F. KENNEDY.

Still more recently, the President in his recent television speech said:

No wasteful, inefficient, or unnecessary

Government activity will be tolerated. We are pledged to a course of true fiscal responsibility leading to a balanced budget in a balanced full employment economy.

I believe that given the passage of this bill, the President has committed himself to a course of true economy in Government expenditures. Of course, it can hardly be expected that this will affect his views on programs already sent to us, but I do anticipate that this new point of view will permeate the programs presented to us this next year. In addition, I anticipate that this philosophy will be reflected in the administering of the programs already provided, or soon to be provided, for the current year.

To those of you who may not be satisfied with these assurances, however, let me point out that in any event, the President cannot spend a nickel unless Congress first authorizes it. As a result, we have in our own hands the power to limit Government expenditures and I do not believe that we will abdicate our responsibilities.

We have a choice to make today which in any event transcends the question of the immediate level of spending and deficits. I believe it is quite clear with the slow growth rate, unemployment, and unused plant capacity that we have facing us today, and can expect in still greater volume tomorrow if our growth rate is not increased, the country is going to demand some kind of action to meet these problems.

I am convinced that there are two roads the Government can follow toward the achievement of this larger and more prosperous economy. I believe we are at the fork of those two roads today. One of these is the tax reduction road. The other is the road of Government expenditure increases.

Many believe that we can spend our way to prosperity. On the other hand, I am firmly convinced that if Congress adopts a tax reduction and revision bill of the type which is before this body today, we can also achieve this more prosperous economy by loosening the constraints which the present Federal tax system imposes on our free enterprise system. These tax reductions will bring about a higher level of economic activity, fuller use of our manpower, more intensive and prosperous use of our plant and equipment, and with the increases in wages, salaries, profits, consumption and investment, there will be increases in Federal tax revenues.

Although it may be possible to achieve the prosperity we desire by either of the two routes I have outlined to you, nevertheless, there is a big difference-a vital

difference between them. The route of Government expenditure increase achieves this higher level of economic activity with larger and larger shares of that activity initiating in the Government-with more labor and more capital being used directly by the Government and with the Government's activities determining in larger and larger part the use of labor and capital in the private sector of the economy. This road leads to big Government, especially big Central Government. My own view, and I believe the view of all of us, is that we should to the full extent possible call upon the private sector of our economy to give us the needed growth. Moreover, I believe that most of us feel that we should encourage provision for the maximum number of government services possible at the State and local government levels. If we achieve our prosperity by the route of big Government spending, we will surely be sounding the death knell to these objectives.

The route I prefer is the tax reduction road which gives us a higher level of economic activity and a bigger and more prosperous and more efficient economy with a larger and larger share of the enlarged activity initiating in the private sector of the economy. If you go this route, the decisions of individuals will govern on such questions as whether private consumption should be increased and diversified in one given line or another, and the decisions as to increases in productive capacity will be left to private business concerns to make. They will be free to acquire more plant and machines, hire more labor, and to expand their inventories in those areas they determine are the most needed by our free enterprise economy.

Section 1 of the bill is a firm, positive assertion of the preference of the United States for the tax reduction road to a bigger, more progressive economy. When we, as a nation, choose this road we are at the same time rejecting the other road, and we want it understood that we do not intend to try to go along both roads at the same time.

The further meaning of section 1 of the bill is that no Government activity is to depend for its justification on the amount it contributes to the total spending of the economy, because we prefer to reduce taxes and allow individuals and business concerns in their own right to make that contribution. On the contrary, any and all activities of the Government have to be justified on their importance in serving other essential goals of the Nation. There is no further justification for an indifferent, attitude toward wasteful, inefficient Gov

ernment activities, merely because they incidentally give employment-tax reduction will also create job opportunities and in lines of activity which better satisfy the character and demands of the people for an enriched life. There is no more justification for half-hearted efforts or outright failure to eliminate Government programs that have outlived their usefulness just because they also contribute to the total spending stream of the economy-that contribution will be better realized by increasing the purchasing power of consumers and investors through tax reduction. Finally, there is no further occasion for using the additional revenues which will be generated by the expansion of the economy as a result of tax reduction and [P. 16988]

revision to finance additional investment expenditures, solely because those additional expenditures might add further to expansion of economic activity. If such additional expansion is desired or needed, tax reduction will achieve it just as surely and through vigorous and progressive forces of the private sectors of the economy.

Let me emphasize the last point. Section 1 of the bill announces very clearly that we are not rejecting a balance in the budget as the guiding criterion for management of the finances of the Federal Government. We are, indeed, emphatically reaffirming that criterion. We are confident that within a relatively short period of time, tax reduction and revision will result in larger Federal revenues than those we could expect without these tax changes. Section 1 of the bill calls upon both the Executive and the Congress to restrain Government expenditures so that this increase in revenues can reduce deficits and bring us sooner to realization of the goal of a balanced budget in a prosperous economy.

I have stressed the contribution this bill will make in achieving a balanced budget and an enlarged economy. These are the principal economic objectives of the bill. If I were called upon to give a definition of the phrase "fiscal responsibility," this is just how I would define it. It means conducting the finances of the Federal Government in such a way that a balanced budget can be and is achieved in an economy which is growing rapidly, providing adequate employment and investment opportunities, making full use of its capital and human resources, and giving the fullest possible play to the initiative and venturesomeness of the private sector. Tax reduction and revision will make it pos

sible for us to achieve these objectivesto be fiscally responsible-with minimum direct intervention by the Government in the decisions of individuals and business concerns.

It has been argued by some that this bill represents an effort by the Federal Government to manage the economy and ignores the precept that taxation should be for revenue purposes only. The argument is completely wrong. This bill reflects an effort by the Federal Government to reduce and remove-not to impose-tax constraints on the economy, to give the private sector of the economy greater wherewithal to do what comes naturally to it and which increases the well-being of all of us. Morevover, it affords us the greatest possible assurance `that we will before long secure revenues equal to or even greater than-Government expenditures. Indeed, failure to provide tax reduction and revision at this time would be fiscally irresponsible. It would represent the Federal Government's ignoring the adverse impact of its excessive tax burdens on the economy and on the budget. We must remember that tax policy cannot be made in a vacuum. If we are to be responsible, we must give the closest possible attention to the effects on the economy of what we do or fail to do-in tax policy.

This bill, therefore, represents a responsible discharge of our duties to sound fiscal management.

Mr. Chairman, I am as sold as I was ever sold on anything that this action is deserving of the support of every Member of this Congress who believes as I do that this country became strong, became what it is today, not as a result of solving every known problem in those days by the expenditure of money from Washington; instead this country became what it is because in the years of our major growth, from infancy to World War II, we left the private sector of this economy in condition so that it could generate the growth that was required to provide the jobs to renew obsolete plant and equipment.

Mr. Chairman, to my way of thinking this bill is a bill on which we can put our stamp of approval by saying that we have as much confidence in the private sector of the free enterprise system as our forefathers had.

Oh, yes, but there is one question in the minds of my colleagues on the minority side. They indicate they do not disagree with what we say. Everybody loves a tax reduction. "But," they say, "what are we going to do about the rate of spending?" They say we are so concerned, because we have such little confidence not only in anyone downtown but

in ourselves as well, the Congress as a whole. They say we have got to have some "ifs" about tax reductions, and we have to attach some "buts" to any tax reduction, and some "maybes."

As I have indicated to you there are two roads we can travel today. We can travel the road of major reliance on the private sector to do some of these things that need to be done by releasing the free enterprise system from these high rates of taxation, or we can continue on down the road that we have been onlong before I ever came to Congress-the road of more and more spending to solve these problems.

Which road are we going to take? What we want to be concerned about is that the present rate of spending is not permitted to get out of hand so that we travel both roads at the same time, because we cannot travel both roads at the same time without bringing on some very serious results.

The gentleman from Wisconsin, for whom I have the utmost respect, stated the other night on television that the Republicans had found or he had found this unbreakable, magic way of providing for assurances that the spending would be held down.

He has not found an unbreakable way. No, he has not found it. He has found some magic figures and he wants to say, if the President is willing to subscribe to them, then the tax reduction may go into effect. But, Mr. Chairman, we tried in the Ways and Means Committee to find such a method and could not, and no one in this Congress is going to find an unbreakable way to assure that expenditures can be held. If what we have in the bill is nothing but a pious hopeand it has been so described, Mr. Chairman by some-it is a pious hope because the people who say it have no confidence in the membership of this House to carry out what undoubtedly must be a moral obligation if you vote for this tax reduction.

Mr. Chairman, I have been a Member of this body for 25 years. At no time have I ever tried or permitted myself to think harshly of any colleague. I have the utmost confidence in every Member, or anyone who can sell himself to an electorate and come to this, the greatest deliberative body on the face of the earth; but let me tell you something, Mr. Chairman, I would not have confidence in the good judgment of any colleague who would resolve after voting for this bill that he could also go down the other road of continued, ever-increasing Federal spending just for purpose of stimulating the economy.

The greatest ps; chological factor that

we can create to control spending is the denial of additional revenues to the Treasury of the United States. If you think this administration, or if you think you as an individual Member of Congress, can continue after this tax reduction to advocate and vote for everything that you may have advocated and voted for before tax reduction to stimulate this economy, my guess is you are going to find your constituency and the American people leaving you.

The greatest factor, Mr. Chairman, is not what we say in this bill, not the magic figures that we conjure up, and certainly not our concern about figures for 2 fiscal years. The final fact is our own performance.

This Congress cannot be judged in the future, having voted for tax reduction, on the basis of what it has done in the past.

To those who say they have no confidence today in the Congress I cannot speak to appealingly, for they have closed minds with respect to the sincerity, in my opinion, of all of us who vote for tax reduction. But I have that confidence, Mr. Chairman, I have that confidence in my colleagues.

Let me again remind each and every one of you that neither this President nor any other President who has ever been in the White House could spend $1 that the Congress did not make available to him. In spite of that fact this is a joint responsibility. We did not call on the President to subscribe to the interpretation that we gave to section 1 of this bill. He agreed to it without any solicitation on my part. I have explained this earlier in my remarks. Remember this was in addition to the President's earlier letter of August 19 on this subject.

The

What is the meaning of that? meaning of that is that for the first time, in my opinion, in years, primary responsibility for the growth we must have is to be placed back where it belongs, on the private sector of this economy. We are asking the free enterprise system to come forward with some of the answers to some of the problems of today.

I would think, Mr. Chairman, that those who may doubt would want to think further with respect to the posi[P. 16989]

tion they put themselves in if they vote for the motion to recommit or if they vote against this bill. This is truly a turning point in economic policy. I plead with you to be a part in making it possible. Let us get away from the mistakes of the past. Let us get on this new road.

BRIEF SUMMARY OF H.R. 8363

Mr. Chairman, I am inserting at this point a summary, which I have prepared of the major provisions of this tax bill, which I previously obtained permission to include.

SUMMARY OF MAJOR PROVISIONS IN TITLES 1, 2, AND 3 OF H.R. 8363

A. RATE REDUCTIONS

1. Individual income tax rates are reduced from the present rates of 20 to 91 percent to rates ranging from 14 to 70 percent in 1965. Rates ranging from 16 77 percent make about two-thirds of this reduction available in 1964.

2. A minimum standard deduction included in this bill, when coupled with personal exemptions, provides a newer and higher income floor before taxes become applicable to individuals. Thus, for single individuals the minimum level at which taxation starts is increased from the present $667 to $900. For a married couple with no children, the floor is increased from $1,333 to $1,600 and for a married couple with 2 children the minimum tax floor is increased from $2,667 to $3,000.

3. The tax rate for corporations in 1964 is reduced from 52 to 50 percent and is further reduced in 1965 to 48 percent.

4. To aid small business, the rate applicable to the first $25,000 of corporate income beginning in 1964 is reduced from 30 to 22 percent.

5. Corporations are placed on a full payas-you-go basis for all of their corporate tax liability above $100,000 so that this liability eventually will be payable in the year in which earned. This is achieved over a 7year period so that after taking into account the corporate tax rate reductions it will not result in an increase in corporate tax payments in the transitional period.

B. STRUCTURAL CHANGES

1. Dividend credit and exclusion

1. The credit for 1964 is decreased from 4 to 2 percent.

2. The credit for 1965 and later years is repealed.

3. The exclusion for 1964 and later years is increased, from $50 to $100 (for married couples it may be $200).

2. Investment credit

1. The "Long" amendment is repealed. (a) The base for depreciation is not to be reduced by 7 percent if property is purchased after June 30, 1963.

(b) For assets purchased before June 30, 1963, the depreciation base for the, future is increased by 7 percent.

2. Lessees of distributors, like lessees of manufacturers, are to base their investment credit on the "fair market value" of the equipment rather than its cost.

3. Escalators and elevators are to be eligible for the investment credit if installed after June 30, 1963, and depreciation after that date is to be "recaptured" as ordinary income if the assets are sold.

4. Federal regulatory agencies are not to require the "flow through" to the consumer of the benefits of the investment credit(a) In the case of "public utility" prop

erty eligible for the 3-percent credit (electric and telephone companies), except over the life of the asset.

(b) In the case of other property eligible for the 7-percent credit (transportation, gas, and oil pipelines), at any time.

3. Group term insurance

1. Employees are to be taxed on this insurance on coverage over $30,000 to the extent provided by employers or other employees.

2. Employees who are retired are not taxed on this income and those naming charities as beneficiaries are not taxed.

3. Cost is determined from a "premium cost table" by 5-year age brackets prepared by the Treasury or actual costs if lower. 4. Employees paying more than their own cost, on protection over $30,000 are allowed a deduction for these excess payments.

4. Reimbursed medical expense Amounts received through accident or health insurance for medical expenses are to be included in the individual's tax base to the extent the insurance payments received exceed the total medical expenses for the injury or sickness.

5. Sick pay exclusion

1. Presently the sick pay exclusion applies to wage contribution payments of up to $100 a week but in the case of sickness where the individual was not hospitalized only after the first week of sickness.

2. The $100 a week exclusion in the future is to be available only to the extent the sickness or accident extends the absence from work beyond 30 days-primarily covering long illnesses and permanently disabled up to retirement age.

6. Sale of residence by person 65 or over Any gain on the sale of a personal residence by a person 65 or over is not to be reported for tax purposes to the extent it represents the gain on the first $20,000 of the sales price of the house.

7. State and local taxes

1. State and local taxes which in the future will continue to be deductible are:

(a) Personal property taxes.

(b) Real property taxes (also foreign). (c) Income taxes (also foreign).

(d) General sales taxes.

2. The principal taxes which will no longer be deductible when attributable to nonbusi

ness purposes are:

(a) Gasoline taxes. (b) Auto tags.

(c) Tobacco taxes.

(d) Alcohol taxes.

(e) Selective excise taxes.

8. Personal casualty and theft losses The deduction of nonbusiness casualty and theft losses is limited to amounts lost in excess of $100 per loss.

9. Charitable contributions

1. The additional 10-percent deduction (30 percent in all) is to be available with respect to charitable contributions generally except those to private foundations.

2. Corporations are to have a 5-year carryforward (rather than a 2-year carryforward)

for contributions in excess of their 5-percent limitation.

3. Gifts of future interests of tangible property are not to be deductible until the gift is completed unless the property is reserved only for the donor's life (or joint lives in the case of a husband and wife). 10. 1-percent limit on medicines and drugs The 1-percent floor on medicines and drugs below which these expenses cannot be taken into account for the medical expense deduction is not to apply to expenses for the care of

1. The taxpayer or his spouse if either has reached age 65; or

2. Any dependent parent over 65 of the taxpayer or his spouse.

11. Child care deduction

1. The deduction is to be available where the wife is incapacitated or institutionalized for 90 days or more.

2. The maximum deduction is raised from $600 to $900 per year but only where there are two or more children.

3. The maximum age of the children for which a child care deduction may be taken is increased from up to 12 to up to 13. 12. Moving expenses

1. Moving expense deductions whether itemized or not) are to be granted for the first time to employees who are not reimbursed and to new employees whether reimbursed or not. These deductions are to be available only for

(a) Transportation expenses of the employee and his family.

(b) Transportation costs for moving personal effects and household goods.

(c) Expenses for meals and lodging of the employee and his family while they are in transit.

2. No change is made in the exclusion of reimbursed "old" employees.

13. Bank loan thsurance

Interest on debt incurred or continued to buy life or endowment insurance or annuities is not to be deductible if the individual systematically borrows part or all of the increase in the cash surrender value to pay his premiums. However, deductions are not to be denied if

(1) he doesn't borrow any part of four out of the first seven annual premiums;

(2) the interest deductions do not exceed $100 a year;

(3) the borrowing was caused by unforseen financial obligations or losses of income; or

(4) the borrowing was used to finance business obligations.

It should be noted that in the explanation of this provision in the committee report, the printers inadvertently omitted a line. On page 62 of the report beginning with the second sentence under (c) (i) 1 of that page the report should read: "However, to prevent avoidance of this provision by taking out a contract with very low premiums for the first 4 years, with the premiums being substantially greater thereafter, the bill contains a rule relating to situations of this type. It is provided that the 7-year period referred to above is to commence again at any time there is a substantial increase in