The Players : Figures Behind Tax Bill Risk Blessing or Curse on Careers

The sweeping tax overhaul bill that Congress appears on the verge of enacting has been shaped and reshaped by a variety of powerful figures, from a former professional basketball player who represents New Jersey in the U.S. Senate to an enormously popular President who is seeking to make his mark on history.

Now the legislation, which was approved by a House-Senate conference committee Saturday and faces almost certain approval by the full House and Senate next month, will leave its own mark on the political careers of those most closely involved with it. Still uncertain is whether that mark will be a blessing or a curse.

Democratic political consultant Robert Squier said voters “have a healthy skepticism of anything that comes to them from Washington labeled: Good news from your government.” He predicted that they will “reserve their applause for April 15, 1987,” when they see how the bill affects their tax returns.

What is clear is that the measure could be the most important domestic legacy of President Reagan’s term in office. And if there is credit to be had, lawmakers of both parties agree that the largest measure will go to Reagan, who put his personal prestige on the line to sell Congress and voters on the idea of lower tax rates and fewer deductions.

“He was the political force who got us to move,” said a House Ways and Means Committee Democrat who asked not to be named. “We weren’t really interested in tax reform.”

That was because the bill threatened special interests, such as the already depressed timber and oil industries, that wield great political and economic clout in individual congressional districts. And it was certain to generate a storm of opposition in areas where individuals stood to lose the hefty deductions they claimed for paying state and local taxes.

So it was a legislative minefield that Reagan lay before Rep. Dan Rostenkowski (D-Ill.) and Sen. Bob Packwood (R-Ore.), chairmen of the tax-writing House Ways and Means Committee and Senate Finance Committee. The dangers of action, however, proved less fearsome than the prospect of being blamed for killing what Reagan had touted as “America’s tax plan.” So both put aside their own misgivings about the bill and joined the cause.

Consequently, Rostenkowski and Packwood are now seen as the bill’s saviors. By contrast, some of tax overhaul’s earliest and most enthusiastic backers have been almost invisible in the congressional jockeying over the measure.

Of the handful of congressmen who had long supported the idea, only Sen. Bill Bradley (D-N.J.), the former professional basketball star who began talking about a “fair tax” bill in 1982, is reaping credit for shaping the final bill. Other early advocates, including Reps. Richard A. Gephardt (D-Mo.) and Jack Kemp (R-N.Y.), slipped off center stage.

But that may prove to be a political asset if the legislation, as some critics predict, turns out to be a drag on the economy.

“People are going to see that the tax breaks were bought at a very high price,” said Rep. Bill Frenzel of Minnesota, one of the most influential Republicans on the Ways and Means Committee. “A lot of people will reap some (political) rewards this year . . . but there’s going to be blame, and I think the blame’s going to be assigned in the same measure.”

Whether they eventually gain or lose from their involvement with the revolutionary bill, here are some of those who helped transform it from an idea to a reality:

PRESIDENT REAGAN

Democratic presidential nominee Walter F. Mondale gave Reagan his opportunity to seize the tax overhaul issue during the 1984 campaign, when Mondale decided not to endorse the tax plan sponsored by fellow Democrats Bradley and Gephardt. Although tax revision had some political appeal, Mondale feared it because it had little support among such bedrock Democratic constituencies as northeastern big-city voters who would lose their deductions for state and local taxes.

“Mondale blew it,” said Joseph Minarik, a tax analyst with the Urban Institute. “With that miscalculation, the President was left with the field all to himself.”

Reagan’s own experience, as well as his political instincts, had drawn him to the cause. He frequently recalled that when he was earning big money as a Hollywood actor in the 1950s, he was stunned to see how it was siphoned by the government, which then imposed a top rate of 91%.

Reagan was hardly the first politician to think about a major overhaul of the heavily encrusted tax code. But he was the first in decades to do something about it.

“Presidents never have original ideas,” said Thomas E. Mann, executive director of the American Political Science Assn. “They’re supposed to pick from ideas out there.” In this case, Mann said, “without his presidential initiative, there would be no tax reform.”

Reagan initiated tax overhaul in early 1984. In response to Democrats’ insistence that taxes be raised to narrow gaping federal deficits, he instead ordered the Treasury Department to propose a way to simplify the tax code by weeding out deductions and slashing tax rates. After giving Congress his tax proposal in May of last year, he lent his personal popularity to the cause, hammering away at its basic themes in televised speeches and personal appearances across the country and railed against “the sharks” who would chew it up.

Reagan was called upon by Democrats to do some personal selling last December. He made a rare visit to Capitol Hill to quiet a revolt by House Republicans that almost killed the legislation even before it got to a House vote.

In the end, Reagan and the tax bill were an unlikely but comfortable match. The effort to prune the tax code of a host of business deductions represented a repudiation of Reagan’s big 1981 tax cut, which had opened gaping holes in the tax system. But it was also the culmination of the President’s effort to drive down the top personal tax rate, which was 70% when he took office, to 28%--a level not seen since before World War II and even lower than the 35% that Reagan himself proposed.

TREASURY SECRETARIES

When Donald T. Regan was Treasury secretary in the first Reagan Administration, Reagan asked him to develop a plan to simplify the tax code by weeding out tax breaks and reducing tax rates. Regan responded in late 1984 with a revolutionary plan that would have eliminated such cherished tax breaks as the personal deduction for state and local tax payments and special corporate deductions for the oil and gas industry.

Regan’s plan, though widely praised as “true tax reform,” showed little sensitivity to the political trade-offs that would be necessary to generate popular support. Not only did it gain little enthusiasm in Congress, but it received only a cool and wary reception from President Reagan himself.

Regan’s personal qualities--he is “stubborn as hell,” says Mann--made Regan seem ill-suited for political give-and-take needed to mollify swarms of special interests and sell the idea to a skittish Congress. “Regan would have alienated the Democratic side,” said one Democratic congressman. “The bill could have blown up in everybody’s face.”

But then tax overhaul fell to affable and savvy James A. Baker III, the White House chief of staff in the first Reagan Administration who swapped jobs with Regan at the beginning of 1985.

Baker was much more willing to sacrifice the ideologically pure for the politically possible. President Reagan’s own tax overhaul plan, drafted under Baker’s direction and submitted to Congress in May of 1985, gave some indications that the White House was willing to bargain on key issues such as restoring tax breaks for the oil industry.

When it came time to cut actual deals with Congress, many of those close to the bill heap praise on Baker’s deputy, Richard G. Darman, who became the Administration’s foot soldier in day-to-day, closed negotiations.

“He’s very cold and very intense, and he’s brilliant,” said one House member. Only a year after moving with Baker from the White House to the Treasury Department, the congressman said, Darman “knew as much tax law as any (congressman) in the room.”

DAN ROSTENKOWSKI

The old-style Chicago Democrat had a personal score to settle. His image as a politician and legislator had suffered in 1981, when his own tax bill lost against Reagan’s in the heavily Democratic House, and again in 1982, when the Senate and White House largely ignored him in drafting changes to the 1981 bill.

“He needed to refurbish his reputation,” Mann said. “And with tax reform, he’s certainly done it.”

Equally important to Rostenkowski was making sure that his party did not get shut out of a sweeping initiative that would touch the lives of virtually every American. “By and large, major policy changes of this sort tend to work to the advantage or disadvantage of the Administration,” Mann said. “But it’s clear the Democrats were a part of this, and some recognition will go to their party” as a result of Rostenkowski’s efforts.

From the start, tax overhaul in the House was “a one-man show,” Frenzel recalled. “It was all Rostenkowski. He really forced it. He played the politics he’s really skilled at.”

He got off to a rough beginning with his committee’s first vote. Rather than curtailing a tax break for banks, as Rostenkowski and Reagan had urged, Ways and Means members voted in closed session to make it even more generous. Cheers broke out when word reached the hallway where throngs of lobbyists were waiting.

But Rostenkowski successfully leaned on the committee to reverse the vote. “Starting the process was in some ways more difficult than finishing,” the Urban Institute’s Minarik said.

From there on out, Rostenkowski changed his strategy. Rather than trying to feel his way to a consensus, he began negotiating with individual Democrats, muscling them into promising that they would give up some tax breaks in order to maintain those that were most important to them. When the bill reached the floor and was in danger of dying, he again had to win votes the old-fashioned way: one by one.

What he gained in legislative stature, however, Rostenkowski may have lost in his already long-shot contest against Jim Wright (D-Tex.), who now ranks second in the House Democratic leadership, to become House Speaker next year when Thomas P. (Tip) O’Neill Jr. (D-Mass.) retires.

“Many members are intensely negative toward him,” one Democrat said. “They’re unhappy with Rostenkowski in terms of how he shoved that bill through. . . . He may have made some very strong friends and loyal friends out of this, but he made some strong enemies.”

BOB PACKWOOD

When the iconoclastic Oregon Republican ascended to the Finance Committee chairmanship in 1984, he declared: “I sort of like the tax code the way it is.” He was an unlikely candidate to become the fourth-quarter hero whom political consultant Squier described as “stealing the ball” on tax overhaul for the Republicans.

Party stalwarts had been somewhat nervous when Packwood succeeded Sen. Bob Dole (R-Kan.) as committee chairman when Dole became Senate majority leader. Throughout his career on the Finance Committee, Packwood consistently advanced ideas for adding to the intricacies of the tax code, not eliminating them.

And some still doubted his loyalty to Reagan. In 1982, Packwood had lost the chairmanship of the Republican Senatorial Campaign Committee in part because he had angered fellow Republicans with his warnings that the President’s “idealized concept of America” would alienate women and minorities.

When the House-passed tax overhaul measure landed on the Finance Committee’s doorstep, Packwood got off to an even more faltering start than Rostenkowski as the bill’s chief shepherd. He spent weeks trying to please everyone on his committee, until the bill was so laden with special-interest deductions that it seemed ready to collapse under its own weight. One Senate aide described the atmosphere as, “Let’s make a deal.”

The unthinkable was happening: After barely surviving its trial in the heavily Democratic House, the bill appeared ready to die at the hands of the President’s own party in the Senate. “At that low ebb, Packwood had to think of an alternative,” Mann said.

That he did stunned almost everyone. Packwood decided to return to what he called “square one.” Starting fresh, he proposed wiping out more deductions and lowering rates further than either the Administration or the House had.

Suddenly, he was being hailed as “the champion of tax reform.”

Packwood’s own fortunes this year have demonstrated, however, that tax overhaul may be a double-edged issue at the polls.

Early in his role as the assailant of special interests, he had to abandon his pledge to protect Oregon’s beleaguered timber industry at all costs. Only weeks after his dramatic moves to save the bill, he made a surprisingly weak showing in Oregon’s GOP primary, drawing only 57% of the vote against a little-known opponent.

COMMITTEE MEMBERS

If the final bill is based on any model, it is the plan advanced in 1982 by Sen. Bradley, then a freshman New Jersey Democrat known mostly as a former basketball player for Princeton University and the New York Knicks.

In part because tax overhaul has enhanced his reputation as an intelligent and substantive lawmaker, Bradley is now widely discussed as a potential contender for his party’s 1988 presidential nomination. Although he has given no indication that he wants to run, Bradley has become “undoubtedly the one single dark horse that everybody thinks of when they think past the logical and self-proclaimed candidates,” Squier said.

Bradley could claim some credit for helping shepherd the bill through Congress as well. When it was in the House, he helped Rostenkowski line up liberal Democratic support for legislation from which a Republican President stood to gain. And he provided vital assistance when Packwood mounted his salvage effort in the Senate.

While Bradley has basked in the limelight focused on tax overhaul, other early backers of the cause have slipped off the stage. Most notable are Kemp, who once pushed his own competing tax plan, and Gephardt, the House’s chief advocate of the Bradley plan.

Kemp, according to Frenzel, is “the philosophical father of the tax plan.” But Frenzel said the Republican presidential hopeful was “not involved in any of the heavy work.”

Gephardt was absent for many of the sessions in which the House Ways and Means Committee pieced together its plan, in part because Rostenkowski asked him to represent the committee in simultaneous negotiations with the Senate that produced Gramm-Rudman deficit reduction legislation.

“He did drop out,” said a fellow Democrat on the committee. “He knew that as soon as Rostenkowski started writing the bill, everybody else would be bit players to Rostenkowski’s star role.”