Senator Critical of Proposed Tax Reform Bill : Cranston Courts Young, Business Community

Democratic Sen. Alan Cranston’s campaign for a fourth term in November has a number of strategic elements, not the least of which are a special appeal to younger voters and a heavy solicitation of campaign contributions from the housing and real estate industries and from venture capitalists.

This weekend, Cranston sent a message to all those groups by announcing new legislation and by taking on the Senate Finance Committee’s new tax reform bill.

“I will introduce a bill in the Senate that would allow young home buyers to use their IRA accounts as the down payment on a home, without incurring a penalty for tapping the accounts early,” Cranston said at a Los Angeles press conference on Saturday, adding that he would also fight the new tax reform bill’s proposal to eliminate income tax deductibility for most IRA accounts.

The senator has other problems as well with the new tax reform bill:

“The tax reform bill is fine in many ways, but . . . it has a long way to go and I’m not sure it is going to get there. It wipes out housing opportunities for low- and middle-income Americans who need some help. . . .”

Cranston explained that the new bill would greatly reduce the tax advantages of investing in home building and real estate partnerships. It could not come at a worse time, he contended, because the Gramm-Rudman spending restrictions preclude much government help for the housing industry.

“So we should be using tax incentives so that private industry will do the job,” he said. “But the Senate committee’s tax bill would deny those incentives and we will face a severe housing shortage in the country if it is not corrected.”

Cranston is the second-ranking Democrat on the Senate Banking, Housing and Urban Affairs Committee, and his attention to banking, real estate and construction interests has been crucial to his fund raising in the past.

Also important to his fund raising are venture capitalists, who recall the instrumental role the senator played in cutting in half the capital gains tax rate in the late 1970s.

Cranston’s Saturday message to that group was:

“The Senate Finance Committee’s tax reform bill . . . is anti-new business. The capital gains differential is totally wiped out by the bill and that would wipe out what helped build the Silicon Valley in California and high-tech industries across the country . . . I will do my best to restore the capital gains differential.”

Business Interests

Although Cranston makes no apologies for paying special attention to business contributors, his aides say his interest in the business sector runs much deeper than campaign donations and goes back to his work in the 1960s for Kaufman & Broad, a Los Angeles real estate and home-building firm.

“Alan is a believer in the capitalist system,” says Cranston’s press secretary, Murray S. Flander, who acknowledges that the senator is more often thought of as a leader of liberal causes ranging from civil rights and day care to nuclear arms control.

Cranston said that in addition to wanting to help young home buyers use their IRAs as down payments, he would also like to allow the use of IRAs to finance college educations.

The 71-year-old senator’s campaign strategists believe that younger voters could be crucial in this election, and Cranston has surrounded himself with a number of young advisers. One of his TV commercials even shows him with young people who can’t vote. He is shown jogging with teen-agers and narrator Lloyd Bridges says, “They can’t vote yet, but they are his (Cranston’s) very special constituents.”