to balance out this whole program. But this is internal and I do not think that is a problem. The CHAIRMAN. Well, it is my impression that this is, this will be, a tax retroactive back to April Secretary KENNEDY. Right. The CHAIRMAN (continuing). When we pass it. Secretary KENNEDY. It is important that it be passed as soon as possible. The CHAIRMAN. And we should not make it any more retroactive than we must. Secretary KENNEDY. Right. The CHAIRMAN. The 5 percent will be a prospective tax next year. Secretary KENNEDY. Right. The CHAIRMAN. It would seem to me that we should dispose of this issue as early as we could, and I do not think it would prejudice the right of anyone who wants to offer his suggestions of tax reform on this bill. Secretary KENNEDY. Right. The CHAIRMAN. I am confident of this bill, having passed the House by a 90-percent margin, is going to pass the Senate in one respect or the other after everyone gets through putting his suggestions in here. Secretary KENNEDY. I think that would be a good legislative procedure. The CHAIRMAN. I just wanted to get your views on it because I think we ought to give people their answer on it. Frankly, it has been my impression if you must vote a big tax on somebody any politician is better off voting for it early in his term than late in his term so he can get the bad news behind him and hope the longer it is, the sooner they forget about it or at least come to accept it, the better off you are. We must dispose of this investment tax credit thing, and I think we ought to do it as soon as we possibly can. Senator WILLIAMS. Mr. Secretary, I certainly want to join in with the chairman supporting of the proposal that we dispose of the investments tax credit at an early a date as possible. I think it would have been better if we had done it sooner but I think we should do it as quickly as possible. Now, in this bill before us as I understand it parts of the recommendation you made yesterday tend to offset the adverse effects to business community by the repeal of the investments tax credit-that was the basis of your suggestion for reducing the corporate tax rate 2 percentage points. Secretary KENNEDY. That is right. The corporate rate reduction should be phased in so it won't affect our anti-inflation program. Senator WILLIAMS. That is right. Phased in. Now my question is how was it the plan of the administration that this 2 percent be implemented. Would it come from the surtax or from the basis 25,000. The reason that I raise that question is if we repeal the investments tax credit it does affect small business as well as large businesses. Secretary KENNEDY. That is right. Senator WILLIAMS. There has been a proposal that in repealing the investments credit we should exempt a certain amount of the expenditures from the repeal of the investments credit. My own feeling is if we repeal it we ought to do away with it entirely, with no exceptions on it. But at the same time, I think we should recognize that we are handicapping small business as well as large and I am wondering if it wouldn't be a good idea on this 2 percentage points to apply at least one of them in each category. Secretary KENNEDY. I think you could split it that way, a half of 1 percent the first year and half of 1 percent next year. I think it would work out all right. Do you have any feeling against that, Mr. Cohen? We may want to think about it but that seems to me to be a reasonable thing to favor the small. Senator WILLIAMS. It wouldn't affect the revenue? It would add some equity if we would be taking care of at the same time, the small business as well as the large, and I thought it may give us a better argument to offset the requests for an exemption from repeal of the investments credit. Secretary KENNEDY. I think it is all right. Mr. COHEN. I think so, Senator. The rate on the first $25,000, as I recall it, dropped from 30 percent to 22 percent 4 or 5 years ago. Senator WILLIAMS. That is right. Mr. COHEN. And I take it your suggestion is to drop it to 21. Mr. COHEN. Two jumps. Senator WILLIAMS. Phased in on the same basis as what you are proposing. Mr. COHEN. I think that this would cost about $70 million in revenue. So that in relation to the total revenue impact of $1.6 billion it would be relatively small. Senator WILLIAMS. Well, we are dealing with repeal of the investment credit which is about three and a quarter billion dollars all told. I thought we would put some equity and it would be much cheaper to do it this way than it would be to exempt the small business from the repeal features of the investment credit. Mr. COHEN. Yes; that is true. It could be done. Secretary KENNEDY. That is right. Senator WILLIAMS. I don't know whether the Treasury has prepared this or not, but if not, perhaps it could be prepared and put in the record. I think it would help all of us and the taxpayers as well to understand it. Have you compiled a table showing not only the rate of the existing law and the amount of tax that the taxpayers pay in various brackets but also the dollar figures for the House bill and the dollar figures for the administration bill all the way down the line for the various categories for a comparison? If you have that, I would suggest we put it in the record at this point. If you don't perhaps you would rather supply it for the record. Secretary KENNEDY. We would be glad to put that in the record. (The Department of the Treasury subsequently supplied the following information :) $3,000 to $4,000. $28,000 to $32,000. $32,000 to $36,000. $35,000 to $40,000. $40,000 to $44,000. $100,000 to $120,000. $200,000 and over. TABLE 2.-H.R. 13270 AND TREASURY PROPOSAL, MARRIED PERSONS RATES (EFFECTIVE 1972) TABLE 3.-EXISTING LAW, SINGLE PERSONS RATES Taxable income bracket 0 to $500.. $500 to $1,000. $1,000 to $1,500. $1,500 to $2,000. $2,000 to $4,000. $4,000 to $6,000. $6,000 to $8,000 $8,000 to $10,000. $16,000 to $18,000. $32,000 to $38,000. $38,000 to $44,000. $44,000 to $50,000. $50,000 to $60,000. $60,000 to $70,000. $70,000 to $80,000. $80,000 to $90,000. $90,000 to $100,000. $100,000 and over. TABLE 4.-HOUSE BILL H.R. 13270, SINGLE PERSONS UNDER 35 RATES (EFFECTIVE 1972) Taxable income bracket 0 to $1,000. $1,000 to $2,000. $2,000 to $3,000. $140,000 to $160,000. $160,000 to $180,000. $180,000 to $200,000. $200,000 and over.. TABLE 2.-H.R. 13270 AND TREASURY PROPOSAL, MARRIED PERSONS RATES (EFFECTIVE 1972) |