Kennedy Decides Against Tax Cut

Press, Volume CI, Issue 29901, 15 August 1962, Page 15

Kennedy Decides Against Tax Cut

(A Z.P A.-Reuter—Copyright) WASHINGTON, August 14. President Kennedy today seemed assured of broad Congressional support for his decision against an immediate tax cut to spur (tie economy.

The President announced in a 30-minute radio and television address last night that to reduce taxes now would needlessly undermine confidence at home and abroad and result in harm

Speaking from his office in the White House, the President acknowledged that economic growth had not been as rapid as he had hoped But he rejected arguments that the country would fall into a recession unless he now took tax-cutting action. He said the United States was enjoying the best period of price stability it had had since the end of World War 11, and that there was no crisis atmosphere among the American people. The economic indicators, showing improvements in July for industrial production employment. wages, profits and the gross national product, he said, did not warrant the conclusion that the United States was facing a new recession or a serious inflationary threat. Debate on Economy The President spoke against the background of a great debate over the economy, involving calls from the combined American trade union movement, the A.F.L.C. 1.0., and the United States Chamber of Commerce for immediate tax cuts totalling thousands of millions of dollars. He rejected these demands, saying that the high tax structure was a "drag” on economic growth and incentive, but that the time was not ripe for tax-cutting action. The right action must be taken at the right time, and “the right time for that bill, it now appears in the absence of an economic crisis, and if the job is to be done in a responsible way, is January 1 1963.” he said. At the same time, the President pledged that, if necessary, he would not hesitate to call Congress back into an emergency session later this year to consider tax-cut proposals. The President's decision against action at this time was said to be based on three main factors First, as he viewed the situation, a tax cut now would undermine confidence at home and abroad.

'Second, key Congressmen dealing with finance and taxation were opposed to tax moves at a time when Congress was trying to cui through the backlog of legislation and adjourn for the Congressional election in November.

Third the Administration feared 'that the introduction of tax legislation would jeopardise the prospects for passage of a comprehensive tax reform bill, involving across-the-board tax cuts, which the President wants to become effective next January 1.

There was wide Congressional support last night for Mr Kennedy’s decision not to seek an immediate tax cut. But a number of Republicans said any future cut must be accompanied by a corresponding reduction in Government spending. The assistant Republican leader in the Senate, Senator Thomas Kuchel (California >, thought the President was “well advised” to refrain from requesting tax reduction legislation in the closing weeks of the present Congress. He said: “The Congress would be well advised, however to refrain from spending more than the President himself has requested. But the regrettable fact is that the reverse has been true.” The chairman of the Senate Republican policy committee, Senator Bourke Hickenlooper (lowa* said his impression was that a tax cut without a decreased spending programme could only “create inflation and worse difficulties than we have now. The important thing is to have decreased spending and a reasonable tax cut at the same time.”

Senator Albert Gore (Democrat, Tennessee) said there should be a "selective reduction" instead of a “scattergun,” across-the-board, tax cut.