Tax Rebate

President Kennedy last week tossed in the towel on tax reform in 1963. Then, too late, he tried to retrieve it.

Appearing before some 300 delegates of the esteemed American Bankers Association gathered for a symposium in Washington's Mayflower Hotel, Kennedy made it eminently clear that he cares far more about a tax cut than tax reform.

Viewing the Crop. Soaring to metaphoric heights, the President urged that all Americans get together behind his new program. "Tax reduction," he said, "will not be passed if each economic group continues to treat growth as a crop to be divided, or if each group examines what is available through the wrong end of a telescope. If the low-income man looks at the dollar amounts of his cut, he will decide that the rich are getting all the breaks; and if the high-income man looks at the percentage cuts, he will decide the opposite. The facts of the matter are that the reduction is fairly distributed through all income brackets. And I would hope that all groups would put the national interest first, and recognize that the prospects for tax reduction and economic growth must not be endangered by squabbles over who is going to get what."

Almost proudly, Kennedy said that his tax program is under attack "from both the right and the left." The unspoken conclusion was that the program must therefore be pretty good. And anyone who opposed it would be helping to bring economic ruin upon the land. If there is no tax cut. claimed Kennedy, then "the country will, in the not too distant future, be struck by its fifth postwar recession, with a heavy loss of jobs and profits, a record-breaking budget deficit, and an increased burden of national debt."

Then came the toss-in. At one time, Kennedy had talked of tax reform as though it were just as important a part of his program as reduction. Now he made it perfectly plain that reduction, which in itself is reform of a sort, came first--and that overall reform might well be sacrificed. Answering questions from the floor, he said: "If we cannot get the reform, then quite obviously you are going to have to rewrite the package. That isn't our judgment of the best action. But I quite agree that what we need is the tax-cut bill this year, and nothing should stand in its way."

Which End of the Road? The next day's news stories reported that Kennedy had all but surrendered on tax reform. At that point, the President had some second thoughts. At his weekly breakfast with congressional leaders, he insisted: "I don't want anyone to get the idea that I'm against reform." A White House aide compounded the confusion. Kennedy, he said, had meant that he would give up reform only if he had reached "the end of the road, so to speak. We are at the start of the road, so his comments are out of context."

The fact of the matter is that tax reform, in any meaningful sense, is dead for at least this year. The dialogue of 1963 will be over tax cuts--and the form they should take. Arkansas' Wilbur Mills, chairman of the key House Ways and Means Committee, is still staying mum on his tax-cut views. But Mills, even as a longtime champion of tax reform, is not necessarily unhappy about Kennedy's cave-in--he hadn't thought that the Administration's proposals were very reform-ful in the first place.

Beyond question, the President's surrender on reform will enhance the chances for a tax cut. But tax cutting still faces a tough time. Many a member of Congress, even though favoring reduction in the abstract, is unwilling to cut taxes at a time when the Administration proposes to break every peacetime spending record in U.S. history. If President Kennedy were willing to cut back on just a few of his New Frontier spending programs, then the tax reduction that he deems so vital to the U.S. would be assured. So far, he has shown no inclination to do any such thing.

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