Treasury Secretary James A. Baker III said tonight that, if the tax code isn't overhauled this year, it may never happen.
"It's our intention, our wish, to try and complete the thing this year," Baker told the Economic Club of New York. "If you don't get it done in the aftermath of a 49-state win, you may not get it done. The president very much wants tax reform this year."
Baker reiterated that President Reagan plans to announce exactly what plan he will endorse "in late April or early May." So far, however, rewriting Treasury's original proposal is going slowly. Officials say no decisions have been made about the new plan, and Baker revealed virtually no details in his speech here.
He did say that the administration won't "kill the goose that lays the golden egg" by doing away with business-tax preferences that enhance investment or international competitiveness.
Baker devoted most of his first major speech since coming to Treasury to the benefits of lower rates and a broader tax base. But he also said his department's rewrite would encourage capital formation, economic risk and investment.
"We obviously need to find a balance," Baker said. "We need the entrepreneurs, the innovators and the risk-takers."
Baker also sounded a call against "artificially lowering" the strong dollar, which has resulted in reduced American exports and a record trade deficit. Instead, he said "sound, convergent, market-oriented economic policies are the best means to assure long-term stability."
Baker responded to numerous questions from the audience, most of whom were business executives, about Treasury's November plan, which would repeal a host of popular preferences for individuals and businesses while cutting the top personal rate from 50 to 35 percent and the corporate rate from 46 to 33 percent. The only question he gave a firm answer to, however, was whether the administration would tolerate a tax increase to reduce the deficit if the spending reduction wasn't enough.
"No," Baker said. In his speech, he said lower tax rates should lead to higher revenue from an expanded tax base.
The Treasury plans would cut back several preferences popular among average taxpayers such as charitable contributions and tax-free fringe benefits. But Baker said "we firmly believe that the majority of Americans would forego some aspects of the tax system which benefit them individually for a simpler and fairer system with lower tax rates overall."