Pirouetting on Civil Rights

By WALTER ISAACSON

Reagan goes round and round on tax breaks for schools

It was quite a turnabout. First, Ronald Reagan reversed a policy established by Congress, the courts and three previous Administrations, by revoking an Internal Revenue Service rule barring tax-exempt status for racially segregated schools. When the inevitable uproar ensued, the President backpedaled by proposing a law to undo what he had just done. Reagan insisted that he was firmly opposed to racial bias; his only concern, he said, was with a procedural principle--the belief that Congress, not the IRS, should exercise control over such rulings. The awkward performance raised serious questions about Reagan's haphazard policymaking apparatus as well as his sensitivity to civil rights. Admitted one top adviser ruefully: "We blew it."

The issue arose out of the contention by some fundamentalist Christian institutions, including Bob Jones University of Greenville, S.C., that the IRS policy of denying tax exemptions because of racial discrimination violated their freedom of religion. Their segregationist policies, they claimed, were grounded in their interpretation of the Bible. But that constitutional argument, which had been rejected by a federal appeals court, was made moot by the Administration's decision to settle the case by revoking a twelve-year-old IRS rule against tax exemptions for schools that discriminate racially. If allowed to stand, the new policy would permit such schools to receive tax-deductible contributions and avoid paying income or Social Security levies.

The decision illustrated a startling ineptitude on the part of the President's staff. Only Counsellor Edwin Meese and Presidential Lawyer Fred Fielding reviewed the proposal, which was recommended by the Treasury and Justice Departments. Meese did not submit it to any of the Cabinet councils, which are designed to let Cabinet members and top staffers consider the consequences of pending proposals, nor did he mention it to the only high-level black presidential aide, Melvin Bradley of the Office of Policy Development.

The first that Chief of Staff James Baker heard of the plan to change the IRS rule was in a telephone call from Attorney General William French Smith two days before the announcement. When Baker asked about it at the next staff meeting, Meese assured him that he and Fielding had considered all the implications. Meese described the matter as a narrow legalistic change and seemed oblivious to the moral and political issues involved. It was presented to Reagan as a routine Administration action, and he was never even asked to give his formal approval.

"It is nothing short of criminal," said Benjamin Hooks, executive director of the N.A.A.C.P. "It opens the door to every racist element in the nation to discriminate and to do it with a subsidy from the Government." For civil rights leaders, the decision was the culmination of an ominous series of Administration actions. Reagan has urged Congress to amend some of the key provisions of the 1965 Voting Rights Act, which helped enfranchise millions of blacks and elect thousands of black officials. The Justice Department has said that it would like to find a way to overturn a Supreme Court decision allowing companies to set up voluntary affirmative action quotas for minorities and that it will not pursue busing as a method of desegregating schools.

Black members of the Administration (only 18 now holding positions that require Senate confirmation) were furious. Said one: "The real question is whether it is the intention of this Administration to appear antiblack. If so, they should just let us know." Deputy Chief of Staff Michael Deaver, who fumed that he would not allow the President to be perceived as a racist, argued that the Administration had to defuse the issue by proposing new legislation to forbid the practice that had been instituted the previous week. Reagan agreed. A spokesman said the proposed legislation would bar tax breaks for all racially biased schools, including Bob Jones University.

Reagan issued a statement explaining that he had not intended to support segregationism. "I am unalterably opposed to racial discrimination in any form," he said. His only intention in changing the tax regulations, he stressed, was to remove from the IRS the power to determine public policy. Said he: "Such agencies, no matter how well intentioned, cannot be allowed to govern by legislative fiat."

The President's explanation seemed a trifle disingenuous. Had he simply wanted Congress to reaffirm the policy of denying tax exemptions to discriminatory schools, he could have submitted such legislation before revoking the rule. Even that could have been interpreted as an un necessary reopening of an old controversy. Congress clearly forbade any Government sanction of, or support for, racial bias in the 1964 Civil Rights Act. In 1970 the IRS applied the policy by withholding tax breaks to discriminatory schools, and the Supreme Court later ruled that this was a correct reading of the law and the Constitution. Argues a civil rights advocate within the Administration: "To attempt again to get Congress to speak on every issue of discrimination is an attempt to destroy the progress made so far."

Rather than wait for Congress to act, civil rights groups will ask the Supreme Court to prevent the IRS rule change from going into effect. The high court previously had agreed to hear an appeal by Bob Jones of a lower court decision denying it tax exemptions. The Justice Department had argued against the university, but is now asking the court to drop the case be cause of Reagan's directive. The Lawyers' Committee for Civil Rights Under Law also said it would contest the new tax poli cy in federal district court in Washington. That court issued a permanent injunction in 1971 forbidding tax benefits to discriminatory schools in Mississippi, and noted that the principle was meant to apply to other states as well.

Reagan's advisers say he was surprised by the vehement reaction to the change in IRS practice. This may be the worst indictment of the Administration. It shows an apparent insensitivity to a basic American belief: that government should do nothing to promote racial discrimination. -- By Walter Isaacson.

Reported by Douglas Brew and Jeanne Saddler/ Washington

With reporting by Douglas Brew, Jeanne Saddler/Washington

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