Evening star., 1963-01-24
Asks Reduction
Of Estate Tax

In addition, it should be
clearly understood that the tax
upon transfer at death would
reduce the size of the taxable
estate, and thereby reduce the
estate tax. The present provi-
sions for extended payment Of
estate taxes would apply to the
new taxes upon appreciated
property transferred at death
and would be liberalized.
My proposal, if enacted.
would apply to gifts made after
this date, but would be phased
to apply fully to transfers at
death only after three years.
The Secretary of the Treasury
will present a technical elabo-
ration of this proposal. E.
5. DefinitiOnaI Changes
The exiting sprawling scope Of
this preferential treatment has
led to serious economic distor-
tions and has encouraged tax
avoidance maneuvers some
times characterized as the cap
ital gains route" This trend
should now be reversed. =.
Wherever the case for a special
subsidy / not compelling, the
definitions should be changed
to limit capital gains to those
transactions which in this area
will be presented by the Sec
retary of the Treasury. They
will include
a. Real estate tax shelters,
which are giving rise to- in
creasingly uneconomic invest
ment practices and are threat
ening legitimate real estate de-
velopments; and
b. The tax treatment of res
tricted stock options. H.. =.
recommend that, with repect
to stock options granted after
this date, the spread between
the option price and the value
of the stock at the date the
option is exercised be taxed at
ordinary income tax rates at
the time the option is exer-
cised.
The averaging provision re-
ferred to above which the Sec
retary of the Treasury will
present will prevent a tax pen
/ atty due to punching Of income
in one year. In addition, pay
ment of tax attributable to ex-
ercise Of the stock option would
be permitted in installments
over several years -.
VII. Summary and Conclusion.
The foregoing program Of
rate reduction and reform pro-
vides for far and comprehen-
i've net reduction in tax IL
abilities at all levels of income.
g. The overall savings are
proportionately highest at the
lower end Of the income scale,
where for taxpayers with ad-
justed gross incomes of less
than $4,000 the reduction is
nearly 40 per cent. AS we move
up the income scale. the per
centage reduction in tax liabil-
tiles declines to slightly less
than 10 per cent for taxpayer
with incomes in excess Of
$4,000.
For all groups Of taxpayers
combined, the reduction is ap-
proximately 10 per cent, but
five out of six taxpayers most
of whom have incomes below
$l0,000-will enjoy a reduction
OF more than 20 per cent.
In addition, the proposed re-
forms will go a long way to-
ward simplifying the problem
Of filling out tax returns for
the more than so million filers
each year
Special tax problems of small
business, the aged, working
mothers and low-income groups
are effectively met. Special
preference - for capital gains,
natural resources, excessive de-
ductions and other areas out
side the tax base are urbed. e.
Members Of Congress: There
is general agreement among
those in business and labor
most concerned that this Ma
ton requires major tax revision,
involving both net tax reduce
ton and base broadening re-
form. There is also general
agreement that this should be
enacted as promptly as is con-
sistent with orderly legislative
process.
Differences which may arise
will be largely those OF degree
and emphasis. I hope that. hav-
ing examined these differences,
the Congress will enact this
year a modification Of our tax
laws along the general lines I
have proposed.
TO repeat what / said in my
message on the state OF the
Union - Now is the time 10
act. We cannot afford To be
timid or slow. For this is the
most urgent task confronting
the Congress I'm i0B3