The MacNeil/Lehrer NewsHour

Intro

JIM LEHRER: Good evening. In the headlines today, Speaker O'Neill said tax reform may be fine for all but the working poor. Another of the Frustaci septuplets died in California. The Reagan administration's top personnel official withdrew under fire. And a Brazilian police chief said he is 90% sure Nazi doctor Joseph Mengele is dead. Robin?

ROBERT MacNEIL: This is our NewsHour menu tonight. After we summarize the news of the day, in our continuing analysis of President Reagan's tax reform plan, governors Mario Cuomo of New York and Richard Thornburgh of Pennsylvania debate the proposal to end deductions for state and local taxes. Commenting on that and giving their own views of the tax plan, we have newspaper editors from Oklahoma, Georgia and Pennsylvania. Our final focus section looks at the pros and cons of New York's action in opening a special high school for homosexuals. News Summary

LEHRER: Tax reform held its place in the issue sun today, with both President Reagan and House Speaker O'Neill talking forcefully about it. O'Neill termed the President's plan a good beginning and predicted some form of tax reform would be on the President's desk by January. But he coupled it with an attack on Mr. Reagan's earlier tax policies that he said had hurt the working poor. O'Neill did his talking in a rare appearance as a witness before a House subcommittee, the one considering tax reform.

Rep. THOMAS P. O'NEILL, Speaker of the House: Our current tax policy is an obstacle course for hard-working people who are struggling to raise themselves and their children out of poverty. Unless the obstacles are removed, low-income workers will fall farther and farther behind in their race to win a modest share of the American dream. While President Roosevelt's proposal -- pardon me. While President Reagan's proposals in this area are a good beginning, we should realize that if they're enacted, the working poor will still be paying more taxes than they did before he took office. The challenge of tax reform is enormous. But the opportunities are enormous as well. We, you particularly, have an historic opportunity to reverse the high -- the rising tax burden of the working poor.

MacNEIL: President Reagan's forum for plugging his tax plan today was a suburban high school in Atlanta, Georgia. And the President pitched his comments to the teenage audience.

Pres. RONALD REAGAN: And the way I see it, if our current tax structure were a TV show, it would either be Foulups, Bleeps and Blunders or Give Me a Break. If it were a record album it would be Gimme Shelter. If it were a movie it would be Revenge of the Nerds or maybe Take the Money and Run. And if the IRS, Internal Revenue Service, ever wants a theme song, maybe they'll get Sting to do "Every breath you take, every move you make, I'll be watching you."

MacNEIL: Right after this news summary, we have a major focus section on the tax plan with governors Mario Cuomo of New York and Richard Thornburgh of Pennsylvania and newspaper editors from three states. The President moved on to Birmingham, Alabama, to end his two-day Sunbelt swing to plug his tax plan and raise campaign funds for three Republican senators up for reelection next year. In Birmingham, Mr. Reagan commented on the Supreme Court ruling this week in an Alabama school prayer case.

Pres. REAGAN: I know there's been a strong push here in Birmingham to help restore voluntary prayer in public schools. As this week's Supreme Court decision shows, we still have an uphill battle before us. So I hope we can also count on the support of Alabama's entire congressional delegation for our prayer amendment, because it is time it was adopted.

LEHRER: Donald Devine stepped aside today. He was head of the federal government's Office of Personnel Management, once part of the old Civil Service Commission. Devine, who is a Reagan appointee, had been under fire for secretly trying to retain control of the agency after his four-year term expired and while waiting for reconfirmation to a second. He told members of the Senate Governmental Affairs Committee this morning that he knew it was over.

DONALD DEVINE, former director, Office of Personnel Management: Clearly I am a political person. And as Senator Eagleton said, even on one occasion, "Yes, you're known as a pro. You can count the votes." Well, Senator Eagleton, I have to admit, I can count the votes, and I don't believe that I can be confirmed by that -- this committee, and therefore I withdraw my nomination, or withdraw my request for reconfirmation, with my head held high and in the belief I did the best I can, and that there is a disagreement on issues which is a legitimate disagreement in American politics.

LEHRER: Seven of the 13 members of the Senate committee are Republicans, as is Devine. But the Associated Press said only three of them would have voted for him, making reconfirmation impossible.

MacNEIL: Police in Brazil today opened a grave which they suspected was that of the hunted Nazi war criminal Dr. Joseph Mengele. As reporters looked on, bones and shreds of clothing were removed from a cemetery in the small town of Embu near Sao Paulo. The police acted on information from the public prosecutor in Frankfurt, West Germany, who said documents recently seized suggested the fugitive may have died six years ago in Brazil. Mengele, the last of the major Nazi war criminals, was known as the Angel of Death at the Auschwitz concentration camp. The police chief of Sao Paulo said he was 90% sure the grave was Mengele's. But in Paris, lawyer Serge Klarsfeld, a leading Nazi hunter, was skeptical. He said, "If Mengele were dead his family would be in a hurry to make it known in order to settle an important inheritance."

In Beirut there was a mass burial today of Palestinians killed in fighting with Shiite Moslems for control of the city's refugee camps. Here's a report by Rod Stephen of Visnews.

ROD STEVENS, Visnews: Suffering terrible grief, these women shed their last remaining tears for the victims of the battle to gain control of the three Palestinian refugee camps in Beirut. Their husbands, sons and daughters were among the first of the innocent to die in the fighting around Shatila, Sabra and Burj al Brajneh. They were unidentified, but they were among the 83 laid out before these mass graves. Their bodies had turned putrid and workers had to don gas masks and rubber gloves before carrying them to the undignified pits.

MacNEIL: Today was the third anniversary of the Isareli invasion of Lebanon and the day set for completion of the Israeli army's staged pullout. But hundreds of troops remained today in a buffer zone north of the border. Israeli officials said they were protecting Lebanese militias under attack by Shiites and would withdraw in the very near future.

LEHRER: Today's development in the Walker Navy spy case came from two U.S. senators. Sam Nunn, Democrat of Georgia, and William Roth, Republican of Delaware, called on President Reagan to act immediately to correct deficiencies in the handling of classified information. The Walker case involves John Walker, his brother, his son and a fourth man. All had connections to the Navy and have been charged with selling classified documents to the Soviet Union. Other members of their alleged spy ring are expected to be arrested soon. The senators said too much information is classified, too many people are cleared to handle it and too little investigating is done by those handlers.

Sen. SAM NUNN, (D) Georgia: We think the number of personnel holding clearances for access to highly sensitive information must be reduced. Our current system cannot adequately ensure the continued integrity and reliability of the 4.2 million Americans who today hold security clearances. I believe, and I think Senator Roth shares this, that the President of the United States should issue an executive order directing that government agencies and contractors substantially cut the number of security clearances within two years. And I strongly suggest a goal of 50 . I don't think we can look at the Walker case and say that we can prevent every episode of this in the future. We're not going to have a perfect system in a free society. But what we can do is take essential steps to make certain we do everything we can to prevent and to deter and to discourage, and when espionage is committed, to try to deal with it and use counterintelligence to cope with it.

LEHRER: Last night the Senate passed a resolution urging President Reagan to continue abiding by the terms of the unratified SALT II nuclear arms treaty. Well, today, the foreign ministers of the NATO countries did the same thing. The informal action came at a meeting of the ministers in Portugal, according to a report from the Associa Frustaci [TEXT OMITTED FROM SOURCE] septuplets died today of lung disease. The dead baby was the second one born and he was named James Martin. Doctors also said his sister Bonni Marie is very, very sick. The other three children were described as in stable condition and improving daily. Tax Reform: Statehouse Views

MacNEIL: For our lead focus section tonight we have a debate on a major part of President Reagan's tax reform plan and one of the most controversial parts: ending deductions for state and local taxes. While polls by Newsweek, The New York Times, CBS and the Associated Press all show majorities supporting the President's plan overall, two of those polls show majorities against the state and local tax change. Yesterday in Oklahoma the President defended this element of his plan.

Pres. REAGAN: Deductions for state and local taxes will also be dropped. Two thirds of Americans don't even itemize, so they receive no benefit from the state and local tax deduction. Yet it is this majority that is now subsidizing a handful of the high-tax states. My friends, some state governments outside Oklahoma have not yet learned to say no to special-interest groups and higher taxes. I just don't believe the good people of Oklahoma or other low-tax states like Texas, Montana or New Hampshire should be forced to pay for their lack of resolve. Do you?

MacNEIL: The apparent leader of the opposition to this aspect of the Reagan plan is the Democratic governor of New York state, Mario Cuomo.

Governor, how would ending the deduction hurt New York state?

Gov. MARIO CUOMO: Ending the deduction would be a violation of our form of federalism. I mean, the most fundamental state's right is the right to tax your own people for your needs. Nobody understands that better than President Reagan -- he's always been a strong supporter of states' rights. As a matter of fact, when the income tax was first passed it was very, very clear that it was never intended to be used against any state. There's never been a double tax. Abraham Lincoln made clear that there shouldn't be, and the arguments for the adoption of the amendment over 70 years ago, it was clear again that there shouldn't and it never has happened.

MacNEIL: Are you saying the proposal is unconstitutional?

Gov. CUOMO: I'm saying that just today in our state, Republicans, not Democrats, urged the President to drop back from this position because it's wrong, and suggested a constitutional amendment to make it clear that this is a fundamental violation of states' rights. It's unfair. It will damage not just New York, but New Jersey and Texas. I spoke with Governor Mark White today. All those states that have special problems, many of them federally created problems. Take welfare. President Reagan has reminded us over and over that that really ought to be a national concern. Well, we meet that concern in this state. We have disproportionate numbers of welfare people, disproportionate number of homeless people. We have 8% of the population of the United States, but we have about 15% of the homeless. Now, we tax ourselves for that. What President Reagan is saying is we should be punished for having taxed ourselves to take care of the homeless, people that he doesn't take care of.

And let me say this quickly. I think it's terribly unfair for the President to suggest to Oklahomans that they ought to be divided away from New Yorkers and from people in New Jersey and Wisconsin and Texas because they're "subsidizing" us. I have news for the President. In the four years before this one, the state of New York gave the federal Treasury $12 billion more than we got back. So who subsidized whom? But you didn't hear New York saying to the President, "Please send us back $12 billion, we're short." We understand that the way this republic works is that you make a contribution to the family Treasury. Then you use it where you need it. When they needed the TVA, you used it there. When they needed the Grand Coulee, you used it there. When they tried to rebuild the South with the wealth of the Northeast, you used it there, because it was appropriate.

MacNEIL: But doesn't it demonstrate the validity of his argument that low-tax states subsidize high-tax states? Because you yourself have estimated that New Yorkers would pay $2 billion more in federal taxes if they couldn't deduct their state and local. That's $2 billion more that at the moment the national Treasury's denied, which affects states like Oklahoma.

Gov. CUOMO: But Robin, what about our $12 billion? Would you give us back our $12 billion? Every year Pat Moynihan publishes figures that show that this state, which generates so much wealth right here in New York City, is regularly -- not every year, but four out of the last five years -- regularly sends more to the Treasury than we get back. Would you say with this nice evenhandedness, "Well, the other states shouldn't -- New York shouldn't have to subsidize the other states, so let's send them back $12 billion"? Of course not. New Jersey 10 years ago wasn't a high-tax state, now it is, because it has new problems. We pay for undocumented aliens. We pay for people from all over the United States who come here. Should we be punished for that? I'll tell you who disagreed some time ago, President Reagan, when he raised his own taxes as governor of California, the largest tax increase in the history of the state of California, he wasn't saying then that he ought to be punished for it. He was saying then that states ought to be allowed to raise their own taxes, to discharge their obligations to their people.

MacNEIL: What about the argument that this is -- this deduction as it presently is only benefits a minority of the taxpayers? The President just said two thirds of the people do not itemize their deductions.

Gov. CUOMO: Who benefits from capital gains that he's fighting so hard to improve? Who benefits from dividend treatment, people with dividends? Does everybody have dividends? Do all those hard-working people in Queens and Brooklyn and Iowa, do they all have dividends and capital gains? Let me ask the President this question. Foreign corporations, corporations that work in foreign governments, get a deduction for the taxes they pay to Japan and Israel and Ireland and Germany. What sense does it make to say that those corporations can get a deduction but a property owner in the suburbs, a property owner who has carefully calculated his tax and his mortgage and maybe even the size of his family depending on it, this middle-class person can't get a deduction. But the President, who talked so much about subsidizing, why should we subsidize the corporations who are paying taxes to foreign countries and taking that as deductions?

MacNEIL: Governor, we'll come back. Jim?

LEHRER: Next, a different view from a different governor, Governor Richard Thornburgh of Pennsylvania, a Republican. He is with us from Harrisburg. Governor, you support eliminating the deduction of state and local taxes, correct?

Gov. RICHARD THORNBURGH: That's right, Jim.

LEHRER: Why?

Gov. THORNBURGH: Well, I think, as usual, fairness is in the eyes of the beholder. If we're going to have reductions in the tax rates for all taxpayers across the United States, then we're going to have to do away with some of the special breaks for some of those taxpayers. I think that those of us in government are well aware that every time you threaten somebody's tax break or shelter that they're going to complain about it. But what I am somewhat surprised at is my friend Governor Cuomo raising an objection to the state and local tax deduction being removed when it benefits only one third of the taxpayers across the nation. And that one third is identified by the Advisory Commission on Intergovernmental Relations as upper-income taxpayers residing in high-spending states. That seems to me to be one of the targets for dealing with tax shelters and deductions when we're trying to bring more fairness into the system. What we will gain from taking away the $38 billion in deductions that these upper-bracket taxpayers now claim is a possibility of reducing across the board the rates of all taxpayers. And that's what I think is at the basis of the fairness issue we're talking about. I have no objection to the fact that New York's taxes are so high. That's a matter for Governor Cuomo and his legislature and his constituents to deal with. What I do object to is those of us in lower-tax states having to make up the difference when they're able to deduct on their federal income tax returns the state and local taxes they pay.

LEHRER: What would be the effect on your state if the state and local tax deductions were eliminated?

Gov. THORNBURGH: What's that?

LEHRER: What would be the effect in Pennsylvania?

Gov. THORNBURGH: We'd be net gainers, Jim, because our taxes here are on a per capita basis about the 26th highest in the nation, and with a reduction in the overall rates to a top rate of 35%, the loss of the state and local tax deduction would be more than compensated for.

LEHRER: What about Governor Cuomo's point that this is a fundamental violation of states' rights to deny this deduction?

Gov. THORNBURGH: Well, I think any kind of deduction, if you look through the history of our taxes, is a matter of grace, something that the federal government decides. And furthermore, this deduction is not claimed by the vast majority of citizens throughout the nation. And it seems to me that to claim that there's some constitutional protection that applies to only one third of the citizens of the nation is a perversion of constitutional law. What we're talking about here is fairness and equity, trying to provide as much in the way of fairness for all taxpayers and taking away some of these special benefits that apply to a small minority.

LEHRER: He says that this would punish New York State for doing the things the federal government will not do. You heard what he said -- welfare and other things like that, taking care of the homeless, et cetera.

Gov. THORNBURGH: Not at all. New York is free to do and govern themselves as they wish. That's the genius of our federal system. New York is free to impose taxes at whatever level they think and on whatever sources they want to describe. But I think what we're trying to reach here is the notion that taxpayers in other states should subsidize part of a higher tax burden in those states like New York who have higher taxes.

LEHRER: What about his criticism of President Reagan's rhetoric when in Oklahoma, saying that "You Oklahomans shouldn't subsidize the people in New York," that he's dividing the nation? What do you think about that?

Gov. THORNBURGH: Well, I think what divides the nation is the unfairness of the present tax structure. If there's anything that demonstrates the unfairness of the deductibility of state and local taxes it's the fact that there's such an enormous difference in viewpoint depending upon what state you're in. Many taxpayers in states that have low taxes obviously object to subsidizing those in other states with high taxes. And the high-tax folks, as we've seen here this evening, object to losing the deduction. When you have that kind of difference you've got an unfair tax system.

LEHRER: Thank you. Robin?

MacNEIL: Governor Cuomo, starting on the constitutional point, the Governor says there no constitutional protection for only one third of the citizens.

Gov. CUOMO: Well, you know, Governor Thornburgh, whom I respect greatly, has been inconsistent throughout his comments. For example, he defends the President's position on capital gains. Are you telling me a majority of the people in this country deal in capital gains? How about dividends? How about my point about the corporations paying foreign governments? His suggestion that only a minority would be affected here -- what about capital gains? This is a program for the rich. We all know that. And how about the $12 billion that we've given to the Treasury? Is Governor Thornburgh going to send back Pennsylvania's share to New York?

MacNEIL: Let's take the points one at a time. Governor?

Gov. THORNBURGH: On the capital gains?

MacNEIL: Yes.

Gov. THORNBURGH: I think that it's been a part of our system and the growth of our free enterprise system and the encouragement of entrepreneurship that the President recognizes is important in the growth of advanced technology industries such as he visited here in Pennsylvania last week. This is the frontier area of growth in our nation, and the fact that we are continuing to recognize the difference in giving special tax treatment to capital gains ought to be good news for all of us who are in the area of this nation in seeing our economy in transition.

Gov. CUOMO: That is perfect Republican philosophy. Now, of course there was deductibility for state and local taxes back to Abraham Lincoln, long before capital gains. Now, Governor Thornburgh says we should have capital gains because it's good for the people who are rich and doing business, and it's been around a long time. But for more than 70 years we've had deductibility. And what's more important, helping the homeless, providing educations for people in college, providing public schools --

MacNEIL: But he says you're free in New York State to do whatever you like in terms of raising taxes.

Gov. CUOMO: Well, will he send back our $12 billion? We sent it to the Treasury. He's complaining about subsidizing us, we're behind $12 billion. And let me ask two other questions.

MacNEIL: Well, ask him, he's right there.

Gov. CUOMO: On the constitutional issue. You're a signatory --

Gov. THORNBURGH: If you want to make up the $12 billion I suggest you go to Washington and not to Harrisburg, Pennsylvania. That's my point.

Gov. CUOMO: Yeah, but you're participating in federal programs. And on the constitutional issue, Dick, you're a signatory to the South Carolina piece. You object because the federal government wants to tell you how to issue bonds. You want an exemption for industrial development bonds. Are you telling me a majority of this nation is involved in industrial development bonds? What you people are saying is, you've picked your special interests -- capital gains, dividends, corporations paying foreign governments -- you don't care about delivering services to the great bulk of our people. That's what we use our taxes for. You've selected your group and you've said, "Now let's take $40 billion away from these states, with New York making the largest contribution, so we can bail out our friends."

MacNEIL: Governor Cuomo -- I mean Thornburgh.

Gov. THORNBURGH: Far from it, my friend. What we -- our special interest is the people of the United States who pay taxes at a rate that's far too high now. And that's where the difference is going to come. By taking away this special dividend -- special deduction that's available only to a third of our taxpayers, we'll be able to cut the rates for all taxpayers across the board. And that's fairness.

MacNEIL: That $48 billion, $38 billion will go to reduce tax rates.

Gov. CUOMO: Look, I remind you, capital gains are not a third of our taxpayers. He keeps ignoring the fact that he wants to take care of the people with tax -- capital gains and dividends and corporations that pay taxes to foreign companies. He hasn't even mentioned those, and I don't blame him: neither does the President. Look, they said they'll negotiate anything. They'll negotiate charities, they'll negotiate capital gains, but not the deductibility of state and local taxes, when they themselves, the conservatives and Republicans, have always said it's a matter of states' rights. Why? Because it's a big-ticket item and because politically they feel that by dividing this country, by counting up the states and saying we can put 35 on one side and 15 on the other, they can run against the minority and squash them.

MacNEIL: Governor Thornburgh?

MacNEIL: Governor Thornburgh?

Gov. THORNBURGH: I think this kind of apocalyptic view of the results of the taking away of this special tax break for those taxpayers who live in high-tax states and are in the high brackets really flies in the face of a very simple proposition. And that proposition is this: should we continue to provide $38 billion in tax breaks to a third of our taxpayers in high brackets in high-tax states, or should we take that $38 billion and spread it over all taxpayers in every state at every bracket throughout the nation?

Gov. CUOMO: Dick, the consistency is what I like. What about capital gains? What about dividends? What about the fact that the rich people come from a 70% bracket to a 35% bracket? What about the fact that everybody knows that the principal beneficiaries here are the rich people? And in terms of its impact, let me give you an expert from our state who disagrees with you, a man who knows a little bit about reform, a Republican by the name of Jack Kemp, who says this plan is a disaster. Now, that's not Mario Cuomo, a Democrat; that's Jack Kemp. Every Republican in this state, and Republicans all across this country are beginning to catch on.

Gov. THORNBURGH: I think what you've seen is a majority of the governors across this nation, who recognize that there's a certain amount of inequity when 15 states are benefiting from a subsidy that comes from the other 35 states because of the disproportionate nature of the effect of this tax deduction. Now, if Messrs. MacNeil and Lehrer want to have the two of us back to talk someday about capital gains and about foreign taxes and about other programs, that's fine. But tonight we're talking about the inequity that results from giving a third of our taxpayers, those in hightax states, in the high brackets, a special tax break. I'm against it, I think it's unfair, and I think the people are going to agree in supporting President Reagan's taking away of this special tax deduction.

Gov. CUOMO: Dick, I thought that move was elegant but clear: you don't want to talk about capital gains, you don't want to talk about dividends, you don't want to talk about corporations paying to foreign governments and getting deductions, you don't want to talk about the fact that this plan helps basically the rich, that it divides this country, that it's a violation of fundamental states' rights. Those majority governors also, in response to my question, you'll recall, said, yes, indeed, it is a matter of states' rights. It's never been done before. We have tax reform in the state of New York. We took 500,000 people off the rolls this year, reduced the rate, increased the bracket, increased the deduction. But we didn't pit the city of Buffalo against the city of Utica. We did it fairly. That can be done nationally. It's not happening now.

MacNEIL: Governor Thornburgh, quick comment?

Gov. THORNBURGH: Well, I think we in Pennsylvania wrote the book on tax simplicity. We've got a flat tax rate, a one-page tax form that can be filled out in half an hour without any professional help. That's what the President's trying to do, to get rid of all these loopholes and shelters and tax deductions that cause people time after time, not only have to pay taxes, but to pay somebody to tell them how much they have to pay taxes.

Gov. CUOMO: Except capital gains and dividends and payments to foreign --

MacNEIL: Gentlemen -- may I ask both of you to hang on a bit? We'd like to move on and then come back. Jim? Tax Reform: Mood for Change

LEHRER: Right. We take the tax reform discussion a further step now with three newspaper editors from areas on President Reagan's sales-pitch itinerary. Last week he went to Malvern in Governor Thornburgh's state of Pennsylvania. Hanna Gardner is the editorial-page editor of the Daily Local News, which serves Malvern. Yesterday Mr. Reagan was in Oklahoma City. Jerry Poole is the chief editorial writer for the Daily Oklahoman in Oklahoma City. And last night and early today the President was in Atlanta, where Tom Teepen is editorial-page editor of the Atlanta Constitution.

Mr. Teepen, how do you feel about this state and local tax issue?

TOM TEEPEN: Well, the Constitution has supported the President's proposal in general, but that is one area that we kind of grumped at him about. We think it would be better to retain the deductibility of state and local taxes. It may be, as has been pointed out by Governor Thornburgh, that only a third of the taxpayers actually deduct that. But the others presumably are reasonably satisfied that their standard deduction encompasses. I think it lends some strengths to the idea of the tax system being reasonably fair, it adds to that perception. The perception of the fairness has been much talked about by the President and others, and legitimately. And I think this contributes, this deductibility, to the perception of fairness. And in addition, as one who has had to argue for the enactment of even urgently necessary state and local taxes, I've found that the point that the increase would be deductible is always a strong selling point. I think it bolsters state and local government in their capacities against the effective preemption of the federal taxing capacity.

LEHRER: Meaning that state and local entities will be reluctant to raise taxes now, you think?

Mr. TEEPEN: I think it makes it more difficult for them. I don't know if it would make them any more reluctant. It's usually, you know, they're under pressure of necessity when they do that. Few governments, I've found, ever do that just for the sheer sport of it. They're reluctant to do it. But this makes it a more difficult selling job.

LEHRER: Mr. Poole in Oklahoma City, are you a Thornburgh man or a Cuomo man on this argument?

JERRY POOLE: Oh, I think I would have to come down very strongly on the side of Governor Thornburgh.

LEHRER: Why is that, sir?

Mr. POOLE: Well, we are in Oklahoma one of those relatively moderate- to lower-tax states who have been subsidizing the dozen or so high-tax states for years. So far as Governor Cuomo's comment about what happened to his $12 billion, we can sympathize with that also. Oklahoma traditionally has sent more to Washington than it has received back. Highway funds are a classic example. We can sympathize with that. But I think the deductibility on the state taxes issue is really one of the basic components of the fairness doctrine that the whole Reagan tax reform plan is grounded on. And my judgment here is that although it cuts both ways, most people out here would tend to go along with it.

LEHRER: I see. Ms. Gardner, who is sitting there next to Governor Thornburgh in Harrisburg, what is your view of this?

HANNA GARDNER: My feeling is that this debate proves what's lacking in the President's plan, which is as soon as you have any deductions at all, you start debating about what's a fair deduction and what isn't a fair deduction. A flat tax would eliminate that debate, and at that point we can start doing our social tinkering with direct grants to the states, direct grants to the cities, as we would want to. I think -- I told my readers that this is not the revolution yet, they can leave their muskets at home. What we've done, what the President has done, is stripped a little bit of the chrome off the '59 Cadillac. It's very interesting, it's nice, but it's not going to take us into the 21st century. In 50 years another president will be arguing that this deduction and that deduction should be eliminated as Congress has added them again and again, and we'll be right back where we started from. I think that this plan hurts the poor, not only in taxes itself but I think it hurts the poor with higher rents; I think it hurts the poor in that their raises in their factories will be coming less often because the employers will see a tax cut and a higher take-home pay. I think that this plan definitely benefits the rich. Since 1980 the highest personal rate has dropped from 70% and under this plan to 35%. The capital gains reduction has been massive since President Reagan has been in office. These are not benefits that will help the country as a whole.

LEHRER: Mr. Poole in Oklahoma, what's your view of the tax plan generally?

Mr. POOLE: Well, there's a considerable amount of skepticism, and rightly so, any time the words "tax simplification" and "tax reform" are floated. Those of us who are a little older can recall in previous years when similar movements got started and along the way became aborted. And what we wound up with was two or three more volumes to the tax code and generally higher taxes for everybody. I'm hopeful that that won't be the case with President Reagan's plan.

LEHRER: What about Ms. Gardner's point that the plan as written now favors -- the same point that Governor Cuomo made, that the plan favors the rich? Do you agree?

Mr. POOLE: Well, I think she's been listening to Tip O'Neill, obviously. We don't view it that way. Most of the taxes that are netted by the Treasury are paid by people in the $12-15,000 on up to $50,000 bracket. I can't see as how reducing the rates on the majority of the taxpayers and spreading the burden is going to hurt. As a matter of fact, I think it'll help in the long run. So far as Governor's Cuomo's complaints about capital gains, he's right in bringing it up -- he's just on the wrong track. We ought to do away with capital gains entirely. So far as tax revision is concerned, the most significant development in tax law that I can recall in recent years was when the late Bill Steiger of Wisconsin got through the reduction in capital gains from -- what was it? 40 or thereabouts then, down to now -- and it produced a very marked and direct correlation in stimulation of new investment and venture capital, which is, Lord knows, what we need in this economy.

LEHRER: Let me go to Mr. Teepen in Atlanta. Is tax reform a big deal to the people in Atlanta, to your readers? Do the people understand it and have they expressed themselves in any way that you can measure?

Mr. TEEPEN: There hasn't been a big outpouring of reaction to this yet. It's a fairly complex proposal, for one thing.

LEHRER: Did the President's visit focus attention?

Mr. TEEPEN: The President's visit focused attention upon a U.S. Senate race that's coming down next year that he's very interested in, and incidentally focused attention on the tax reform as well. I've seen no outpouring of interest in this yet. People are a little bit cautious, they're a little bit scared. We've all heard about tax reform for a long while. Everybody's been burned who thought we were going to get there before. One of the things that a lot of people will be watching, certainly I will be, is, is this going to remain reform to the degree that it is reform, or is what is reformist about it going to be negotiated out of it and we wind up simply with another tax code? And I think that, of course, turns us into a whole different issue and one I think we can ill afford at this point.

LEHRER: All right, thank you.

Mr. TEEPEN: But the reaction here has not been great. Letters to the editor have been few. One came in -- I was charmed by it, it's the first genuinely original political idea I've heard in years. It was demanding a minimum tax on the poor.

LEHRER: Minimum tax on the poor. Okay.

Mr. TEEPEN: Yes, sir.

LEHRER: All right, thank you. Robin?

MacNEIL: Governor Cuomo, is it a big issue, or does the President have to make it a big issue to get this thing through?

Gov. CUOMO: I think once the recognition level rises a bit, once programs like this program --

MacNEIL: It's not spontaneously a big issue?

Gov. CUOMO: No, I think what happens is, you say "tax reform" and everybody cheers. Certainly we do in New York state -- we want tax reform, we want a simpler, fairer, more efficient plan. But then you get precise and you say, "You're a property owner in the suburbs, pal, and you've just lost your deduction for your property tax and now maybe you can't pay your mortgage" and things change. And you say, "But while you've lost that, your neighbor 10 miles away who lives in the rich neighborhood, he's going to get his capital gains taken care of." So as you multiply knowledge of the details of this plan, you're going to see an enormous amount of dissatisfaction. When people find out, for example, that Governor Thornburgh wants to strike out this deduction for that property owner but he wants industrial development bonds to be tax exempt because he uses them in his state to develop things, people will be unhappy.

MacNEIL: Is this a big issue in Pennsylvania, before the President raised it, Governor?

Gov. THORNBURGH: I don't know that it's a consuming issue. I think the world's not going to come to an end if this tax reform program or any other tax reform program isn't passed. But I think there are very important elements of fairness and simplicity and equity that are in the President's proposal that have engendered wide support, Democrat and Republican, across the country. We're here airing some differences over what I think is a very sound and solid blueprint for the future to bring greater fairness, greater simplicity and more equity across the country to everybody who pays their taxes.

MacNEIL: Mr. Poole in Oklahoma City, do you sense, as Governor Cuomo just said, that as people learn more about the fine print in this that opposition to the general approval is rising? Are the details more negative than the overall package?

Mr. POOLE: Oh, I think I would have to agree with Governor Cuomo on that point. Obviously there hasn't been time for the average citizen to sit down and apply his calculator to the new plan and compare it with his '84 return and see exactly how it cuts. Here in Oklahoma, for example, we have a sharp division within the petroleum industry on the various -- on the impact of the various provisions that came out. But I would agree with my two colleagues in Pennsylvania and Georgia that it certainly wasn't a burning issue before and it isn't now. We're confronted with a much more clear and present danger of a whopping big increase in state taxes with the legislature and the governor wrangling in session now. So you know, you shoot the thief that's already in the room; you don't worry about the one around the corner.

MacNEIL: Governor Thornburgh, how about Ms. Gardner's point that the way she sees the whole thing, it does not help the nation as a whole?

Gov. THORNBURGH: I simply don't understand that, Robin. It seems to me when we're talking specifically about the deductibility of state and local taxes, which is the biggest dollars-and-cents piece of the whole package, it is beyond peradventure of a doubt that taking away a deduction that benefits only a third of the taxpayers and spreading the benefits that you gain over all of the taxpayers is fair.

MacNEIL: Ms. Gardner? Why do you disagree with that?

Ms. GARDNER: I have to say that when I was speaking about the package as a whole I was referring to the whole thing, not just the state and local deductions. And I think that any tax package which does not do more to help the poor than this one does will not benefit the country as a whole.

MacNEIL: I'd like to pick up on that point and ask each of you quickly, there's a proposal surfacing in the House of Representatives to add a fourth tax rate above the highest 35 rate proposed by the President in order to reintroduce progressivity to the thing. Do you think that is a goer, Governor Cuomo?

Gov. CUOMO: It's difficult to say now. I think, for example --

MacNEIL: Would you be in favor of that?

Gov. CUOMO: While trying to pose alternatives to the $38 billion in state and local deductions, you could jump the rate a little bit, you could do something with capital gains, you could do something with dividends, you could do something with payment -- take a little from all other parts of the plan to give back the states their fundamental states' right to tax themselves. And part of that could be inching up the rate to give a little more progressivity.

MacNEIL: We just have a few seconds. Governor Thornburgh, what would you think about that, adding a fourth rate for the very best-off people in the country in order to make some of these other things possible?

Gov. THORNBURGH: Oh, everything's on the table, I think, when you're in the Congress. But I guess the essential point that I want to make about the whole package is that if I had my choice between what we have now, this complex maze of taxes, deductions, shelters, benefits and whatever, and what the President's proposed, I think the President comes off a clear winner.

MacNEIL: Okay. Well, Governor Thornburgh, Governor Cuomo, Ms. Gardner, Mr. Teepen and Mr. Poole, thank you all for joining us. Special School

LEHRER: Our next focus segment flows from a story that appeared in the lower-right-hand corner of the front page of this morning's New York Times. The headline: "New York Offering Public School Geared to Homosexual Students." It is thought to be the first public school of its kind in the nation. Charlayne Hunter-Gault has more.

CHARLAYNE HUNTER-GAULT [voice-over]: It's called the Harvey Milk School, after the gay San Francisco supervisor shot to death seven years ago. Located in New York City's Greenwich Village, it has 20 students, ages 14 to 19. The New York City Board of Education is operating the school in conjunction with the Institute for the Protection of Lesbian and Gay Youth. Today city officials and others associated with the school explained its purpose and its reason for being.

NATHAN QUINONES, Chancellor, Board of Education: These are youngsters who would, in most instances, never have been allowed to remain in a high school setting previously, and for all intents and purposes would really have been abandoned by the institutions upon whom they had depended. This has nothing to do as to whether we support or what we consider about their lifestyles. These are youngsters in need, and youngsters who would be certainly cruising on the West Side of Manhattan in order to get some money or some attention for themselves.

FRED GOLDHABER, teacher: One youngster didn't go to school for two years. She is now attending our school every day and she is a star, and she's very happy learning. This is something that she wanted to do, but she never was able to motivate herself to deal with all the other hostile people there. Her school identified her as lesbian. They harassed her, they harassed her friends, and she just went to the building to hang out and then leave with her friends.

GRAM, student: You have to deal with people pointing at you. You have to deal with people laughing at you. You have to deal with teachers ignoring you. You have to deal with people talking down to you, like there's something wrong with you. You raise your hand and you raise your hand and you're ignored. When they finally do call on you, it's like, "Okay, what do you want? I wish you weren't here. You're bothering me," when I'm the one who's there trying to learn. You have people who just stare at you -- "Oh, look who's asking a question." It's just that type of environment. And some people are physically abused. I was lucky enough to never be one of those people because I can handle myself, but other people can't, and they just stop school.

Mr. GOLDHABER: They don't want to deal with the hostility from the other youngsters, and some of them encounter hostilities from their teachers. I've been told that in one case in particular a youngster was identified as gay in his gym class and he was forced by his gym teacher to attend the girls' gym classes. That's outrageous, and that's a horrible thing for any youngster to have to undergo. It sounds like something out of David Copperfield.

HUNTER-GAULT: When you look at your fellow students, who actually have only been in this class since April, how much of an attitude change do you see?

GRAM: I see when they get there, some of them it takes them longer, because they've been exposed to the outside for so long. But some of them, they really warm up, they really can relax. They can let down some of the defenses that they've built up. They can let themselves out. They're not used to worrying about who's looking over their shoulder or who's over there, who's pointing at them. I've learned more in this semester than I've learned, like, in public school, like the last six months. Because everybody's gay, everybody's comfortable.

HUNTER-GAULT: What do you want to ultimately do, have you thought about it?

GRAM: With my life? I'd like to be a psychologist.

HUNTER-GAULT: Any reason?

GRAM: Because I've had to deal with a lot of problems in my life and I'm very good at understanding them. And I think I can help a lot of people.

HUNTER-GAULT: With us now to tell us more about the who, what and how of the Harvey Milk School is Joyce Hunter, project director for the Institute for the Protection of Lesbian and Gay Youth. And we also have some reaction from Sandra Feldman, executive director of the United Federation of Teachers, which represents some 72,000 teachers and other school employees in New York City.

Ms. Hunter, to you first. Can you add anything to why it is New York City needs a separate school for homosexual students?

JOYCE HUNTER: I just want to add that this particular -- we really discussed this problem, the issue of, which has been brought up quite a few times today, of ghettoizing the kids and putting them into this particular school. As Gram, you know, and the others talked about, this school is specifically for those youngsters who couldn't not get along in the traditional high school system.

HUNTER-GAULT: Dropouts.

Ms. HUNTER: Yeah. They dropped out because they had been abused, many of them; some of them harassed and humiliated, as the teacher explained about that young boy. And this was very carefully thought out. And I want to make this very clear: these kids, there is so much violence against lesbian and gay people, and a lot of it has been going on in the schools for many years. NGTF [National Gay Task Force] did a study of 2,100 people, and one fifth of the females talked about how they were abused and harassed in junior high school and high school, and half of the males were harassed and abused. And there's a lot of violence, and that violence has got to stop. We tried so many different ways to -- before setting up this program. We tried to get them into other alternative high schools, the existing high schools. We've done training with counselors in hopes of, you know, broadening, you know, their thoughts on homosexuality and trying to make them realize that they've got to teach these youngsters not to hate. And there's so much bigotry and -- that's one of the major problems, I think, in the schools, is that the kids are not taught not to hate and to pick on somebody who is different.

HUNTER-GAULT: Well, how can you be sure that they don't lose as much in an all-gay environment? I assume the teachers are gay as well. How can you be sure they don't lose as much as they gain by this protection?

Ms. HUNTER: Well, look at the other alternatives. The other alternatives is that they'll be out on the street. And I guess there's some give and take. We thought about this very, very carefully. Many of these youngsters do have straight friends, and they're not being isolated from the straight population.

HUNTER-GAULT: How exactly does it differ from a regular school, other than the fact that the environment is all gay?

Ms. HUNTER: Well, it's sort of like the one-room schoolhouse, and they're taught -- other than that they're taught history, literature, mathematics, reading. And for those youngsters who are slower than the others, we have a tutoring program for them. And there also is a support system with the Institute in terms of counseling and that sort of thing. We also have a socialization program at the Institute that is social and cultural, and we talk about living in the real world and growing up gay in this world. And so we deal with all these issues.

HUNTER-GAULT: Well, Ms. Feldman, what's your reaction to the school and what you've heard?

SANDRA FELDMAN: Well, I'm very sympathetic to the kids who need a safe and secure and tolerant learning atmosphere, but I do not believe that a separate gay school is an educationally sound environment. I would be in favor --

HUNTER-GAULT: But haven't the regular schools failed these kids?

Ms. FELDMAN: Well, the regular schools have failed, obviously failed these kids, and they've failed some other kids, and there are a lot of very good alternative programs for dropouts in the city schools, and there are programs being developed now for dropouts. And I don't see any reason why a program couldn't be developed that created a sympathetic and tolerant atmosphere in a heterogeneous setting in the New York City school system.

HUNTER-GAULT: Why is it more important to maintain the heterogeneous setting?

Ms. FELDMAN: Well, because there's a world out there that kids have to adapt to in the first place. I can understand an outreach program. I can understand counseling sessions maybe with all-gay kids. I can understand a transitional program into a regular school setting, a sympathetic regular school setting. But there is a world out there that the kids have to operate in. There is a long way to go between age 14 and adulthood, and I think putting youngsters in a separate environment because of their gayness at that young age is -- I think it's questionable. I think that a lot more study and a lot more research and a lot more looking into how you handle this problem has to be done in order to do the right thing by these kids. Now, if there is intolerance and brutality, I think that that cannot be condoned. I think there ought to be -- they're entitled to a safe school environment.

HUNTER-GAULT: Ms. Hunter, how do you respond to Ms. Feldman's concern?

Ms. HUNTER: Well, I don't disagree with you. I think what you're talking about really is the ideal. We did try other things. We worked with counselors in the school system trying to figure out in what alternative schools these kids would fit in. And it hasn't worked. That's been the problem. And we're trying to work with it the best way we can. I agree with you that the kids have -- there's a real world out there, and we do talk about those things, and the kids' friends can come to the Institute, and they've been involved in some of our socialization programs. They're not being isolated from heterosexual kids. Because right now there is no other alternative, and if you could show me something that would be better, I mean, we would certainly look at it.

Ms. FELDMAN: Well, there are --

Ms. HUNTER: And I would like to see them also in a heterogeneous atmosphere. As somebody who's worked very hard in the movement, the lesbian and gay movement, wanting to have lesbian and gay people to assimilate into the, in general, public and society and be accepted.

HUNTER-GAULT: What were you about to say?

Ms. FELDMAN: Well, I was about to say that the young man who was interviewed just before is to me obviously a young man who can make it in a heterogeneous and heterosexual environment.

HUNTER-GAULT: But he was one of the few willing to be interviewed. I think most of the young people were very frightened about the publicity.

Ms. FELDMAN: Well, that could be for lots of different reasons. I mean, obviously the media can be very frightening to anybody, let alone young people. But I know enough about the school system; my feelings as an educator are that you just ought not to isolate kids for that kind of reason. I'm generally integrationist in any event and I am not for isolating kids in general on a single standard of that kind. And I think certainly in terms of gayness at that young age they really need to be able to adapt to the world that they're going to have to live in.

HUNTER-GAULT: On that point, Ms. Hunter, some psychiatrists that we spoke with today said that it troubled them that kids as young as 14, whose sexual identities may not even yet be formed, being put into an environment like that could be very dangerous for them, because they may not be gay, they may be simply going through a stage. How do you respond to that?

Ms. HUNTER: I was told I was going through a stage at 10 years old, but, I don't know, I never got out of it.

Ms. FELDMAN: Well, I think it's a very valid point. I would be very concerned as a parent or just as an educator that a terrible mistake wasn't being made here. Fourteen-year-old kids, teenagers and adolescents, are very mixed up often, and I think that to make it so definite to them that they're gay and that they're going to be in a single-standard, isolated, segregated kind of gay environment in school -- there are people -- I know gay people who say they were mixed up until age 40 and weren't sure whether they were gay or not. So I don't think you can be so clear at age 14. And I think it's a mistake.

Ms. HUNTER: One of the things I want to say. If somebody comes in and says they're confused but still want to be in our school, they're going to go to that school because that school is not going to tell them, "We want you to be gay" or "We want you to be straight." This will be a safe place for them while they're even being confused. I mean, I think that's an okay place to be at 14 if you're confused.

HUNTER-GAULT: I mean, will the counseling --

Ms. HUNTER: The counseling will take care of that.

HUNTER-GAULT: The kids who seem to be wanting to hold onto their heterosexual identity but aren't sure -- I mean, is there counseling to reinforce that as well as to reinforce them to be whoever they are and what they are?

Ms. HUNTER: Well, first of all, I don't think counseling should be there to reinforce anything. I think the counseling situation is a place where somebody should be able to talk about their feelings and articulate those feelings, and they will then come to a conclusion about where they are sexually. And I'm going to say very clearly, because I do disagree, I mean, people, when they come -- and I've been working with lesbian and gay adolescents for over 10 years, and if a kid has come to me and said to me, "I am gay," they are gay, and I have not seen -- when a kid comes to me and tells me they're confused, yes. I mean, I've had kids come and say they're confused amd who did not say that they were gay. But if they identify as gay, in my experience in working with this group, they're gay.

Ms. FELDMAN: But even if they are, I would say -- you know, I'm not an expert on that issue. But I would say even if they are gay -- and I think there's always a question -- but even if they are, I think that there ought to be counseling, there ought to be help, there ought to be groups that --

HUNTER-GAULT: Treatment rather than segregation. Some of the psychiatrists said that today, too. How would you respond to that -- treatment rather than segregation?

Ms. HUNTER: Well, the point is, these kids are not going to go to school. They have not been in school. And as you know, because you spoke to some of them, they are not going to go to school. They would not go to school. We have young people who are now attending classes every day who before had not been in school for over a year ago; they had not even been in a classroom.

Ms. FELDMAN: But there are programs that are outreach programs that are transitional, and they are very successful. There was an academy attached to Boys and Girls High School, for example, which had really very difficult kids who ended up being turnkeyed into the regular schools. And if that were the goal, I would be much more sympathetic to a temporary environment.

HUNTER-GAULT: But this isn't a temporary situation?

Ms. HUNTER: Well, it could be temporary. If the child felt that they were going on and doing well, that they could then go into a traditional high school if they felt that's where they wanted to go.

HUNTER-GAULT: All right, we just have a couple of seconds left. And there was such a mob scene down at your school today. I'd just like to know very briefly, what kind of reaction generally have you gotten today? Has it been positive, negative, inquisitive?

Ms. HUNTER: Overall, positive. Overall it's been positive. Overall it's been positive. But one thing again I want to say --

HUNTER-GAULT: Well, I'm sorry, I think we're out of time, and I think you've made several very good points, as well as you, Ms. Feldman. Thank you very much for both being with us.

LEHRER: Again, the major stories on this Thursday. House Speaker O'Neill predicted Congress will pass a tax reform bill this session. He said President Reagan's plan is a good beginning but does not go far enough in helping the working poor. A police chief in Brazil said he is 90% sure he has found the body of Joseph Mengele, the Nazi Angel of Death doctor who conducted human experiments at World War II concentration camps. And another of the Frustaci septuplets died. That leaves four of the seven still alive. Good night, Robin.

MacNEIL: Good night, Jim. That's our NewsHour tonight. We will be back tomorrow night. I'm Robert MacNeil. Good night.