Lights, Cameras, Tax Reform!

By Evan Thomas

Lobbyists usually prefer to work in the shadows, but last week they found themselves blinking uncomfortably in the light. In a moment that merged two historical events, the most radical tax-reform plan in decades arrived on the Senate floor the very week that the chamber was opened up for the first time to live television.

In the glare of TV lights, Senators who might normally be inclined to slip in an amendment or two to protect favored interest groups instead extolled the virtues of tax fairness as they preened for the folks back home. With public sentiment already riled by the influence-peddling scandal surrounding former White House Aide Michael Deaver, it was an inopportune time for lawmakers to appear beholden to lobbyists on the evening news. As Senate Majority Leader Robert Dole dryly warned his colleagues last week, "I wouldn't want to be offering any tax breaks."

Indeed, Dole predicted that tax reform was "unstoppable" and that Congress would have a tax-overhaul bill "on the President's desk by Labor Day." The Senate leaders are "trying to create a self-fulfilling prophecy," noted Congressional Expert Norman Ornstein of the American Enterprise Institute. Even so, most Hill watchers were betting that Dole's prediction would come true.

In a single stroke, the Senate bill would sweep away years of accreted tax breaks, deductions, credits and accounting rules. It is "the most radical tax bill that this Congress has seen in half a century," proclaimed the bill's chief sponsor, Senate Finance Committee Chairman Robert Packwood of Oregon. There are legions of winners and losers on both the corporate and personal sides; yet the lure of substantially lower rates and the chance for businesses to compete on a level playing field have helped generate an unusually diverse, if fragile, alliance of more than 600 lobbying interests representing rich and poor, individuals and businesses alike. Called the 15/ 27/33 Coalition (after the proposed rates of 15% and 27% for individuals and 33% for corporations), it is pledged to oppose any substantive amendments to the bill on the Senate floor.

Proponents of tax reform know that once the Senate starts making exceptions for one interest group, the whole package will unravel. The best protection against major amendments is the requirement that the bill be revenue neutral: it must neither lose nor raise revenue over a five-year period. Anyone who offers an amendment that costs revenue is virtually obliged to propose another way to make up the lost money. Thus preserving one Senator's sacred cow would mean goring another's.

The most serious threat to the bill comes from those who want to restore deductions for income invested in the highly popular Individual Retirement Accounts. The cost: $26 billion. New York's Republican Senator Alfonse D'Amato has proposed that the Senate make up the difference by delaying the so-called indexing that prevents taxpayers from being pushed into higher brackets. But many of D'Amato's colleagues reject the idea as highly regressive: IRAs tend to benefit upper-income groups, while indexing helps those who earn less.

Senators have already suggested some 30-odd amendments that would restore such well-established tax breaks as charitable deductions for non-itemizers, favored treatment for capital gains and full deductions for interest payments as well as for state and local sales taxes. A TIME poll conducted by Yankelovich, Clancy, Shulman late last month showed widespread popular support for retaining many of these tax breaks (see chart).*

Somewhat surprisingly, perhaps, the poll also showed that many Americans are still not paying close attention to tax reform. Only one out of ten reported that they were very familiar with the tax-reform packages before Congress, and 36% said they were not familiar at all.

Inevitably, televising the Senate debate over the bill is bound to heighten public awareness. There is no doubt whatever that the cameras' presence will also change how at least some Senators behave. One old hand, 38-year Veteran Russell Long of Louisiana, immediately took to wearing dark glasses on the floor to shield his eyes from the bright lighting required for TV, removing his shades only when he stood to address his colleagues and the camera. With tongue in cheek, Senator John Glenn of Ohio pledged, "I plan to do nothing different." Then he took out a makeup kit, dabbed at his forehead and smoothed his thinning hair. One of the younger and more telegenic Senators who sits at the back of the chamber, Albert Gore of Tennessee, complained that the yellow wall that serves as his TV backdrop looks like "a Greyhound bus terminal."

For those with stage fright, a seasoned veteran at the game offered a few hints about how to behave in front of the cameras. "Learn your lines," advised Ronald Reagan at a White House breakfast for Senators last week. "Don't bump into the furniture. And in the kissing scenes, keep your mouth closed."

Lobbyists (and legislators interested in restoring loopholes) are expected to keep their mouths shut about tax reform until the bill goes to a closed-door conference where whatever passes the Senate must be reconciled with the House-passed version. House-Senate conferences tend to be chaotic trading games where deals are cut in back corridors long after the nightly news has signed off. As the battle over tax reform reaches its final hour, the House-Senate conference looms as the dark at the end of the tunnel.

FOOTNOTE: *A total of 1,013 Americans were polled by telephone May 20-22. The potential sampling error is plus or minus 3%.

CHART: TEXT NOT AVAILABLE

With reporting by Jay Branegan and John E. Yang/ Washington