Mortimer M. Caplin, former Commissioner of Internal Revenue, yesterday predicted that the Carter administration's tax reform program to be sent to Congress later this year "will be a quantum step forward."
In a speech to the Womens National Democratic Club, Caplin predicted that the proposals would go a long way toward simplifying the tax law, and in treating most forms of income alike.
"Within the next few years, we'll see the elimination of double taxation of (corporate) dividends," Caplin predicted. He said this could be accomplished either by eliminating the corporate tax completely, or by giving stockholders a credit for taxes paid by the corporation.
Coincidentally, Treasury Secretary W. Michael Blumenthal yesterday told the National Association of Manufacturers that "in principle, we want to tax as many sources of income as possible in like manner. Philosophically, I've never understood the difference between earned and unearned income."
Under present law, there is a 50 per cent maximum tax on earned income such as salary or wages, but the rates can go to 70 per cent on "unearned income" such as interest and dividends.
Blumenthal said that the administration's proposals, which will deal with the double taxation of dividends, would go to Congress in October or November, after President Carter's welfare proposals.
Caplin, a lawyer in private practice here, praised the change in estate and gift tax regulations in the 1976 legislation which by unifying credits ultimately will allow one spouse to pass on to the other an estate of $425,000 tax free. "I hope that the approach in the future will be to tax only once a generation, so that a husband or wife can transfer his or her entire estate without tax," he said.
He also applauded the new tax law's emphasis on a more generous standard deduction, but warned that other elements of the new law had complicated tax matters both for taxpayers and attorneys. He suggested that anyone who had made a will prior to passage of the 1976 law would do well to have it reviewed in light of the new rules.