Treasury choice admits a whole new approach to taxes
Donald T. Regan, Ronald Reagan's choice for US secretary of the Treasury, is a businessman's businessman: prosperous, well tailored, and an articulate defender of corporate enterprise.
"I'm a free competition man myself, a capitalist by nature," he told the Senate Finance Committee at a Jan. 6 confirmation hearing.
How will his bottom-line experience as chief of Merril Lynch & Co. affect his performance as a government official? Mr. Reagan's hearing was one step short of perfunctory, yet pointed out some key areas where the secretary of the Treasury is on the opposite side of the fence from business -- and must act accordingly.
The first of those areas is taxes. Regan told the committee that "a taxpayer has the right, indeed the duty, to minimize his taxes." Yet later he said that, if confirmed as head of the Treasury, he would "collect every nickel of taxes the US has coming to it."
As expected, the toughest questions Regan faced dealt with "tax straddles," an investor strategy for lowering taxes by shuffling capital gains from one year to the next.The Internal Revenue Service (IRS) has challenged the legality, of straddling.
Merrill Lynch, under Regan, has counseled clients on the fine art of such tax avoidance.
"I have not used tax straddling as part of an investment procedure," Regan said, in response to a question from committee chairman Robert Dole (R) of Kansas, "nor have I recommended it to any client. It is one of the services offered by Merrill Lynch, and [as head of the company] I am responsible for all Merrill's policies."
As Treasury secretary, Regan would set tax policy for the Reagan administration and oversee operations of the IRS. Pressed by committee member Daniel P. Moynihan (D) of New York, regan admitted the scheme his company has counseled is "one of our [the US government's] most serious tax losses."
Another issue on which Regan the bureaucrat may disagree with Regan the businessman is federal help for ailing companies.
As a capitalist, Regan told the committee he believed in the judgment of the marketplace. "If we're going to have casualties, that's just part of capitalism ," he shrugged.
But, surrounded by reporters after his stint on the witness stand, Regan said his Darwinian views did not apply to Chrysler Corporation. "It is a special situation," he said.
On inflation's causes, Regan proclaimed a classic capitalitt's view. "There is no doubt," he told Sen. Harry F. Byrd (Ind.) of Virginia, that the chief engine of inflation "is federal deficit spending."
However pure his ideological stand, the realities of government financing will force Treasury Secretary Regan to compromise. "If everything works well, we can see a balanced budget in the fourth year of the Reagan administration," he told the committee.
President-elect Reagan promised during the campaign that the budget would be balanced in three years -- perhaps two. Treasury nominee Regan's announcement was the first administration admission this might not be possible.