Hordes Plan Last-Ditch Fights to Save Special Benefits : Tax Bill Conferees Face Lobbyist Siege

When Congress’ two top tax writers, Sen. Bob Packwood (R-Ore.) and Rep. Dan Rostenkowski (D-Ill.), appeared together in public last week, they were given a matching pair of World War I helmets. Where they’re going, they could use the protection.

Rostenkowski and Packwood will head the House-Senate conference committee that next month will begin to patch together a final tax overhaul bill from the separate versions passed by each house. That committee is the last chance for hordes of lobbyists from hundreds of interest groups to obtain concessions that could save their clients millions--even billions--of dollars.

And, with that much money at stake, the battles are bound to be bloody.

“I’ve got a proposition to make to my pal, Bob Packwood,” Rostenkowski told an assembly of women tax lawyers last week. “If he’ll cover me while I take on oil and gas, I’ll cover him while he takes real estate. There’s no reason why we shouldn’t give each other cover.”

Seeking Political Credit

But it won’t be that easy. While Rostenkowski and Packwood are fending off assaults from outside, they will also be maneuvering against each other to come out on top in the high-stakes struggle for political credit.

“There will be a clear split along partisan and institutional lines when the conference begins,” said Rep. Robert T. Matsui (D-Sacramento), a Ways and Means Committee member.

Each side has shaped its tax revision plan with its own political goals in mind.

“The Senate will go in under the ‘growth’ banner,” Treasury Secretary James A. Baker III said, “while the House goes in with ‘fairness.’ ”

The two goals are not necessarily incompatible. Indeed, it is the tax revision plans’ unusual combination of low rates and elimination of tax breaks that has enabled them to appeal to both Republicans and Democrats, surviving for nearly two years an endless series of perils that would have torpedoed almost any other legislation.

“What holds this together,” said Jeff Bell, legislative director of the White House-sponsored lobbying group Citizens for America, “is that conservatives get rate cuts and liberals get to soak the rich. They’re both happy.”

But that has not prevented either side from trying to gain the upper hand.

‘Lose-Lose Situation’

“The House is in a lose-lose situation,” a Packwood aide gloated. “We’ve set the standard, so, if rates go up in the final package, they get blamed. And, if more loopholes get added back in, they get blamed.”

However, House strategists think they also can score political points. “Never mind what the rates are--just look at who gets the money,” a top Ways and Means staff member said. “On that basis, we can pinpoint the flaws in the Senate bill.”

Congressional leaders began staking out their positions for the coming conference in television interviews as early as Tuesday night and Wednesday morning.

Low rates have “been the magic that’s held this together” in the Senate, Majority Leader Bob Dole (R-Kan.) said.

And Rostenkowski left no doubt about his position: “I’m going to be (just) as interested . . . in how this affects the middle-income family. That, I think, is the true glue that would keep reform together.”

Despite all the political maneuvering, the drive to rewrite the tax code now appears to be unstoppable, leading to a dramatic reversal of decades of effort to expand tax preferences for narrow economic goals and favored interest groups.

“You win some; you lose some,” admitted Mark Bloomfield, chief lobbyist for Americans for Capital Formation, a business group that seeks to expand tax incentives for business investment. “We’ll be back to fight another day.”

Many of the toughest fights in the conference committee will focus on esoteric issues that do not directly affect most taxpayers. But, because preserving one group’s tax preference requires eliminating another tax break or raising rates, all taxpayers have a stake in even the most obscure issues.

Wipes Out Shelters

Each bill zeroes in on different industries. The Senate bill, for example, would wipe out nearly all real estate tax shelters. The House also cracks down on shelters, but less rigorously.

Also, the House bill curtails oil industry tax breaks that were sacrosanct to a majority of the committee that wrote the Senate plan.

Lobbyists are hoping to exploit those differences by playing off each side against the other.

“We backed the Senate bill because it was a better deal for us than the House’s,” said a bank lobbyist, who spoke on the condition that he not be identified. “Now, we’ll see what else we can get out of the conference.”

But many are setting their sights much lower, now that a major tax overhaul substantially increasing business taxes and cracking down on dozens of tax preferences seems inevitable.

“At least, our members have nice tall buildings to jump off,” joked Wayne Thevenot, who represents commercial real estate interests that would be particularly hard hit by the Senate bill. “All we want to do now is cushion the fall.”

Aiming Heavy Artillery

Because the Senate successfully resisted any major changes in its bill, interest groups seeking detailed changes have already begun training their heavy artillery on the participants in the coming bargaining sessions.

“If Packwood wants to know where the lobbyists are,” Rostenkowski said, “they’re all in my office.”