U.S. TREASURY'S BAKER OPPOSES TAX INCREASE
U.S. Treasury Secretary James Baker
said that he opposes a Federal tax increase to help reduce the
budget deficit and favors spending cuts instead.
    "I don't think it's (a tax increase) is a very good idea
and I'm quite confident that President Reagan doesn't think
it's a very good idea," Baker said in an interview on Cable
News Network's "Moneyline" television program.
    He said U.S. taxpayers are taxed at a rate of 19 pct of GNP
which is traditionally where it has been, but the Federal
Government is spending at a rate of 24 pct of GNP. Baker said
spending cuts are clearly the best way to cut budget deficits.
    Baker said he opposed a stock transactions tax proposed by
House Speaker Jim Wright, D-Tex, or other special taxes.
    "The stock transfer tax would be a particularly unfortunate
approach to take," the Treasury Secretary said. He said the
United States has some of the most efficient capital markets in
the world and new taxes would impair efficiency.
    On the international front, Baker said banks must do more
lending to developing countries. He was questioned about this
after the Standard and Poor's Corp downgrading today of the
debt of six major money center bank holding companies, largely
because of their heavy developing nation loan exposure.
    Baker said that developing countries must adopt free market
economic policies such as in the United States. He said capital
flows will be required to support the needed reforms in the
economic systems of those countries.
    The money must come either through equity or debt and Baker
said that developing nations' "investment regimes do not
support enough equity investment, so you've got to have some
debt there."
    Commenting on the U.S. trade deficit, Baker said "I think
you're going to see a 15 to 20 billion dlr reduction this
year."
 Reuter
