Nixon, Shultz & Cohen on Tax policy and Congressional relations

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Thank you.

Let me tell you, you are a damn fool to stay in government.

I was up when I saw the whole firm.

Alexander, Guthrie, and all those fellas, they're all saying that the only man who created the department was a label called George.

Well, you're not the only man who created the department.

You've got to be.

That's all right.

But I must say that, uh, you've got a lot of support.

I know, I know.

They, uh, they, they apparently don't, maybe they don't want you as a competitor.

Okay.

Hasn't that abandoned them eight years ago?

I don't, I don't.

Now, I, you certainly know, you see, it's hard to be in a position where you can still have any parts attached on.

You know, we, because of the, the, these guys, as you know, are a bunch of

You have their respect.

We hold you.

Stand up for a little while longer and we'll work out something.

They're all your friends.

They're your friends.

At least they talk to you.

Try to keep the balance as best you can.

Yeah.

What you think of some of that crap that was said out in the camp?

unbelievable that's really even even mills and stuff yeah i mean that that was unbelievable uh thank god we thank god we resisted saying anything you know except that property tax thing which we can't live with and of course the school

But he's got two constituencies within that committee.

Who?

Logan Bell.

Yeah.

He has a terrible time on the Democratic side of the committee.

Sure.

He's led on the committee in recent years, so many members of the Democratic study group, and now he can't control them.

Sure, and they're the people that will make a difference whenever he wants to go for speaker.

Right.

That's why he has to appeal to them and then drift to the other side.

His views, his heart, he knows what's right.

Wilbur, and that's why when he comes in and talks, he's always very reasonable.

But when he gets down there, he's got to appear like a radical.

Because they aren't much of a real, real guy.

Some of them are intelligent, though.

Oh, they're smart.

Yes, Sam Gibbons and Laura, most are to the left, but you can reason with them if you get the time, and they're very intelligent.

Sure.

Well, I have a question for you.

What are we saying?

Well, we have two things we wanted to get your help on.

We have, you remember that last winter you referred a set of questions to the ACIR, and they have now completed a draft report.

It will be met on tomorrow and the next day.

And, of course, we're representing on that.

And we will have to either abstain or yes or no, argue and so on.

And I think, on the whole, we can come out of this with our position all right and loosened up so we aren't pinned down.

But we wanted to go through with you their recommendations.

Eddie, you have your version of the agenda written down here, just to have your guidance on the conditions that we could be taking.

Yeah.

They go right into this school and property tax business.

let's see as far as if we really don't come to any place where you have a split until number four with the commission that's right we're posturing ourselves all the way through to be on square terms with your statements and at the same time to the extent that we can be taken off strong hooks on

Some of these things, why it's, it's a useful exercise.

Well, we had some disagreement with the recommendation, too.

Yeah, I see what you did.

I see what you did here, but I think you're going to recommend my hand.

Well, I mean, if you're right, you would have deleted it in some relationship.

Household, you know.

I don't understand the difference.

There's not a difference.

And that is whether the federal government gives the credit on the federal tax return or whether the federal government makes grants to the states so that the states can give the credit on that tax return.

And they had, in the initial set of recommendations that were sent out to the commission members,

They have raised those in the alternative when the commission, I think, is choosing between the two alternatives.

But the more recent set of recommendations sent out last weekend, they have gone for a federal plan to fund state secretaries.

One with a number of advantages to the federal government, but

Maybe you would prefer, in light of your previous statements, to leave that option open so that they wouldn't choose and make the decisions between those two options.

This is by way of the reserve.

This is a good review of the possibility of doing the same thing.

Well, before the election, I know we all felt it should be that way, this way.

And it's easier, as I understand it, it's cleaner to just give it to the states and let them handle it.

Isn't that right?

These governors and mayors must prefer that.

Fourteen states already have bonds and circuit breakers, and they all vary.

Whereas if we have a single federal credit, we have to make the decision that's the precise form of it, administer it through the Internal Revenue Service,

And it's probably more costly to the federal government to throw it alone.

If you give the grant to the state, you can do it as a matching grant, but it has to burden on the states.

The governors and mayors are... Well, we went through all this, as I recall, from a political standpoint.

At that point, it was frankly a political decision.

We discussed it as a political decision.

At this point,

I don't think there's any good politics in the big man tax thing anyway.

I just think the best thing is to say, you know, do what is right and say what jumped ahead of the radicals, you know, who want to destroy the system.

I like some of the things that have been suggested with regard to simplification, and maybe we ought to, you know, move in that direction.

i'm not sure i'm not sure though so we are they're working on that at all but i've got to do some of the properties actually in my view is it well you can do it you can do it more than we can we just buy straight out get it from the states and let them make a few points as long as we keep the options open that we need to open up right today i think what we'll end up doing is doing it the clean way and say well we've been bragging about it

We can get more mileage per dollar of impact on property taxes out of working with the state than we can doing it ourselves.

And you remember when we talked about that as a broad proposition, finding $10 billion somewhere in the federal budget is a pretty darn hard thing to find.

So if we can bring the state to the picture while we're at it.

It's hard to find $1 billion in the federal budget.

Don't make it.

Well, you know, keep the option open, but let me say it's a little bit.

Let's do the right thing.

Clean this way, but give us a little credit.

One political consideration in the Congress is that if you go to the grant system, you don't know which committee in the Congress will take jurisdiction.

If you go to the credit system, it will be Wilbur Wells.

Well, that's better.

It's better to get a key to the response than anything.

Are you going to roll that?

If I am, it's not as good.

See, all these nice things I say about the mills, you tell them about them.

There's bad things to say about them, you don't tell me.

I think perhaps our crickiest support are five and six having to do with the value added tax and what they thought we would let up.

Well, we're trying to be in a position where we where no one can say we're in any way considering proposing that this year but not getting ourselves in a position where we can never propose it or where if we do

Somebody can say, well, you opposed it back there in 1972.

How come you're changing your mind now?

So we're trying to straddle out a little bit here.

And you can see the way it's going.

That's why the alternative A was reworded a little bit.

Right.

Which way would you prefer?

Alternative A or alternative B?

Which would you prefer?

Alternative A.

And if we preferred A, if you look under position, it's under your control.

All right, good.

Good.

What about four?

I passed that over, but wasn't there something there?

Well, four is a way of getting a little bit pregnant on five.

That is, they say, we're going to handle in-craft state disparities, but give us a billion or two to help temporarily.

Well, we don't think that anything like that is temporary.

And that does swing you into exactly the kind of problems we find out of places.

So we don't make much of a recommendation for.

All right.

I agree.

Number six, you can see we're just suggesting they pass.

Now, where do we move from here?

Well, I thought that I might go Monday and make a day of it.

And another thing is take my new deputy secretary and let him be introduced to them.

He knows them both.

We might take some other people, but make that round.

If that sounds reasonable to you, we'll...

In some ways, we're not quite prepared, because we don't know exactly what we're going to do on taxes, and we don't know exactly what we want to do on trade, but we can take their temperature and get full appeal for it.

I tell them that, actually, I think it's a pretty good position to go to them and say,

We recognize the facts of life.

We know that the president won the election, but we don't control the House and Senate.

The president feels it's time, rather than our proposing and getting into a confrontation with the Congress, he really wants to consult you and see what you have in mind, what you advise.

Let them stick their necks out a little bit.

that, of course, don't care what we're going to do.

Maybe leave them a little here and there.

But I think it would be good if we wanted to get one consultant that we have some ideas.

And of course, remember, we have to, we've got to have some conversations.

The private school, that's a political commitment.

I have to push it.

The other one is the property tax thing.

the property tax and the age, well, we just finished discussing that.

We had another memorandum for you that I guess is covered by the earlier discussion that we can't go back and consider the federal state credit aspect of this in that regard.

The prior decision is binding at this point.

We had a little trouble with one aspect of the program that we worked out before the election, which we still think is a fine program, but just

The problem of stating the floor of the credit, the decision was to state it in terms of percentages, 5% of income.

And we, Theo and Eddie, can give you a lot more than I can.

That's right.

The experts have got to work it out.

We just want the principal worked out because we've committed to it.

It's just ridiculous.

It's just moronic.

That's one thing that is wrong.

I mean, sure, a lot of these are wrong, too, but that's... We have a place in Newtown, Denmark, Maine.

You have it?

My wife has a girl's camp there.

Had it for almost 60 years in the family.

and we know because the caretaker is in the head of the local government and he's had to probably do property tax assessments and is there only means of running the local government the school system except for what the state gives them yeah yeah they live with that problem well i just hope we can work something out there to be positive on that one

Well, I think within the framework of the discussion here, we have a good amount of room to move around in and we can have something constructive to say.

And with Eddie's help, we'll hope to get you some recommendations.

We can get more recommendations, and then also, as they went to Congress at this time, play the game a bit.

We are conservative in advance.

I'll be ready to talk to them later on.

We will, of course, make recommendations, but we're not there to fight them.

We're there to get things through.

But on the other hand, also, we're quite positive.

they have democracies elections over now and uh we're not going to go down any of those roads well i hope they don't think you're going to be beaten for it that's the problem they may think that there's a need for it you know it's an interesting thing everybody is scared to death

but also the accelerated depreciation.

I don't think they're going to turn that around.

Do you?

We had some question as to the revenue estimates on the depreciation, the ADR, the estimate of around $3 billion, and how it's costing that.

We're not quite sure that all the companies have been electing it.

Oh.

And if a survey that we want to try to take shows that it's not, we might...

and be able to have some revenue saving.

They may have estimated too much loss of revenue when we put the depreciation system into effect.

We said it was a two-edged sword when we proposed it, that there were some minuses for the companies as well as pluses, and that may generally be so.

I don't want to know.

Everybody comes in and everybody's supposed to talk to me about everything, sir.

I think it would be very useful to think in terms of two meetings with you.

One, a kind of a first round discussion

with some broad options to get a roof from you on.

And then once we've got... On the whole tax front, or are we just these two things?

On the whole tax front, I think that in simplification and some of these other things, like minimum tax and various other things.

And then after we have a good sense of direction, we can fill it out a little bit more and then come back again.

Do you think the minimum tax on this line will be interpreted as being very smart?

With respect to individuals, an interesting fact emerges that 80 to 90 percent of the base to which the minimum tax is applied is capital gains.

So most of the capital gain revenue, it only amounts to a couple hundred million dollars on individuals, comes from capital gain, very little of it from depreciation or forming or accelerated depreciation and selling.

With respect to the corporate revenue, which is about another two to three hundred million dollars, most of it's coming from the oil companies, some from the timber companies that have capital gains of 30 timber.

So it isn't applying on a broad base of preferences.

It's some increase in taxes if we strengthen the minimum tax.

Well, what I meant is that if you strengthen, what I meant is that if you did that, I would use that for the purpose of giving relief in another area.

My point is that if you do not raise the level of taxes, that that is not an increase in taxes.

See, if we could parallelize... See, take that.

Remember, we were using part of them to put some of the money.

Right.

In addition to the address of growth to take care of the old folks.

Right.

Or maybe the school money.

See, we're going to do like that.

And it's the right thing to do.

There should be a minimum tax.

Yes, there ought to be some form of it.

I think the one that was passed is not very good.

It's written on the floor of the Senate.

Well, nothing has written on the floor of the Senate that's any good.

There it is.

Well, Eddie has some, uh, has some good thoughts on how to make that better.

Well, you have a flat version now, don't you?

You'll get that together.

Yes.

Let's see, you've already got another one.

That's all we've got you for.

You get one, too, because I'll give you the oldest memory.

When you're 60, retire.

That ain't money.

Okay?

I'm 58.

Okay.

I'm not giving these back.

All are approved.

If there are any mistakes, thank you, ma'am.

Nixon, Shultz & Cohen on Tax policy and Congressional relations

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Nixon Library Finding Aid

Also recorded on December 13, 1972

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