US Presidency
1981

Now, let me explain what the situation is and what's at issue. With our budget cuts, we've presented a complete program of reduction in tax rates. Again, our purpose was to provide incentive for the individual, incentives for business to encourage production and hiring of the unemployed, and to free up money for investment. Our bill calls for a 5-percent reduction in the income tax rates by October 1st, a 10-percent reduction beginning July 1st, 1982, and another 10-percent cut a year later, a 25-percent total reduction over 3 years. But then to ensure the tax cut is permanent, we call for indexing the tax rates in 1985, which means adjusting them for inflation. As it is now, if you get a cost-of-living raise that's intended to keep you even with inflation, you find that the increase in the number of dollars you get may very likely move you into a higher tax bracket, and you wind up poorer than you would. This is called bracket creep. Bracket creep is an insidious tax. Let me give an example.