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¶ DIVIDEND EXCLUSION AND CREDIT. A stockholder may now exclude from income the first $50 received in dividends. He can also subtract from his tax 4% of dividend income in excess of $50.
¶ RETIREMENT CREDIT. This complex provision—it takes up nearly two-thirds of a page in Form 1040—has permitted retired individuals to take a credit against their tax for part of their pension income. Income from social security and railroad retirement plans would still be excluded from taxation.
While they include something for everybody, Kennedy's tax proposals fall far short of a serious assault on the tax code's inequities and complexities. The package would give proportionately little relief to those who are most inequitably burdened by the present code—the upper-middle-income taxpayers. A big slice of their gains through rate reductions would be canceled out by the subtraction of 5% of income from their itemized deductions. To advocates of genuine tax reform, the Kennedy proposals are likely to seem inadequate. Deep reduction in tax rates would provide a rare chance to push for thorough reform—and Kennedy fails to do that. He not only leaves a lot of the old complexity, but here and there even adds a new gimmick. He makes only a timid stab at the oil depletion allowances, a longtime chief target of reformers. Indeed, the package suggests, upon close examination, that the reform proposals are included mainly to placate Arkansas' Congressman Wilbur D. Mills, champion of tax reform and head of the tax-writing Ways and Means Committee (TIME Cover, Jan. 11).
"The Most Urgent Task." Inadequate as they may look to real tax reformers, Kennedy's proposed revisions may run up against strenuous opposition in Congress. The U.S. tax system, says one expert, is "a continuing struggle among conflicting interests for the privilege of paying the least." Even the rate reductions will be eyed warily by congressional conservatives disturbed about the $11.9 billion deficit in the budget that the President recently announced. Says an Administration tax official: "It will take a lot of profiles in courage to pass this package."
The President sounds as if he, at least, is going to push for his proposals. "Now is the time to act," he said. "We cannot afford to be timid or slow. For this is the most urgent task confronting the Congress in 1963."
* Actually, neither brother got high marks from Professor Caplin.