Who Wants a Tax Cut?

By 9:50 a.m., ten minutes before the grand opening, there was standing room only. What was it? A preview of John Wayne playing Hamlet? Or of Liz Taylor in The Life of Liz Taylor? No indeed. It was the start of the House Ways and Means Committee hearings on President Kennedy's tax program.

Punctually at 10 o'clock, Treasury Secretary Douglas Dillon, clad in befitting banker's grey, marched into the hearing room and, at the urging of newspaper photographers, shook hands and matched smile for smile with Ways and Means Chairman Wilbur Mills. Once the hearing got under way, smiles faded from all faces.

Wary of Deficits. The "primary objective" of the Administration's tax-cutting program, Dillon began, "is to release our economy from the shackles of an overly repressive income tax rate structure so that it can move ahead to full-capacity utilization of its human and physical resources." No sooner had Dillon finished reading a 75-page prepared statement than Wisconsin's Congressman John W. Byrnes moved in to attack. Said Byrnes, top-ranking Republican on Ways and Means: "I believe there are two essential requisites for a tax reduction this year. First, there must be some willingness to tailor expenditures to the need for tax reduction and bring federal spending under control. So far, I have not seen any evidence of that willingness on the part of the Administration. Second, the greater part of the proposed structural reforms must be put in the deep freeze."

On Capitol Hill, the Byrnes view was more representative than Republican. For Kennedy's tax program is in dreadful legislative trouble. Congressmen are wary of the huge deficit that the program envisions--and the mail from home makes them even warier. Says one Congressman: "I haven't had a single letter favoring a tax cut." Says another: "My mail has been running 20 to 1 against the President's program."

Wary of Recession. On paper, the President's program would combine tax reduction with tax "reform." But there is a strong suspicion that President Kennedy really cares only about the reduction--and that mostly for political purposes. Says one White House aide candidly: "No Administration was ever voted out for running a deficit. But some have been voted out because of a recession." There is also the suspicion that Kennedy considers the reform proposals expendable, included them in his package program only as a sop to Ways and Means Chairman Mills, a longtime champion of real tax reform.

Republican Dillon, a convinced advocate of tax reform, attempted to still such unworthy suspicions. Tax reduction and tax reform, he said, are "inseparable" in the Administration package. The total yearly cost of the tax cuts, when fully in effect in 1965, would by Dillon's estimate come to $13.6 billion. The proposed structural revisions would recover some $3.3 billion--for a net revenue loss of about $10 billion. That, said Dillon, is "the maximum revenue loss that can safely be accepted."

Dillon's testimony did not satisfy the Congressmen--least of all Arkansas' Mills. He has long cherished the goal of drastically revising the income tax laws, combining deep rate cuts with a closing or narrowing of the tax code's numerous routes of tax avoidance. He wants a tax code that is cleaner, simpler, more equitable than the present tangle, and plainly is no admirer of the Administration package. It would cut the rates, all right, but its proposed reforms are skimpy, uneven and not very fair.

Mills will presumably draft his own tax bill. If he cannot push it through Congress, there may be no tax bill at all this year. "Wilbur may not be able to get the kind of bill he wants," says a member of Ways and Means. "But he can kill a bill he doesn't want."

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