PHASE 2: The Great Debate Begins

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It is this plan that will be the focus of the great economic debate in the coming months. Wilbur Mills strongly favors an investment tax credit, but doubts that business should be granted a credit as large as 10%. He is looking for ways to give a bigger tax break to people in the lower income brackets, thus putting a Democratic stamp on the Nixon program. To do this, Mills is considering eliminating $3.5 billion in depreciation benefits that took effect in January, and reducing the investment credit from 10% to 7%.

Does this formula sound familiar? In the early 1960s, the Kennedy Administration introduced a 7% investment tax credit and cut corporate and personal taxes. Business investment jumped nearly 37% in the next three years—and the U.S. economy was off and running on the longest period of sustained expansion in its history.