Last Protests Slow Tax Bill’s Advance to Senate Passage

What Sen. Bob Packwood (R-Ore.) called “the most dramatic change in the history of the tax code” slogged slowly and inevitably toward the lawbooks Friday, with only a handful of frustrated lawmakers’ protests delaying final Senate approval of a top-to-bottom revision of the federal income tax law.

Packwood, who drafted the overhaul legislation this summer with House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.), said late Friday that “any glimmer of hope” among the bi1819027315House resoundingly approved the bill, 292 to 136.

Big Vote for Bill Seen

Senate Majority Leader Bob Dole (R-Kan.) expressed hope that the measure could be passed this afternoon. If the Senate follows the House--and Packwood expects three-fourths of the 100 senators to do so--the bill would become law with President Reagan’s signature.

New figures released by Congress’ Joint Tax Committee forecast that 76.3 million households will receive tax cuts under the law when it is fully in effect in 1988. The tax reductions range from an average of $170 for families earning less than $10,000 annually to $841 for households in the $40,000-$50,00 bracket and to a whopping $50,122 for taxpayers making more than $200,000 a year.

An additional 20.4 million households would face a tax increase in 1988, averaging from $214 for some under-$10,000 households to $55,700 for over-$200,000 households.

The dimming chances of blocking the landmark legislation, which cuts tax rates and wipes out many personal and business tax loopholes, did not keep the bill’s few vocal opponents from railing against it in lengthy evening speeches on the Senate floor.

Sen. John C. Danforth (R-Mo.), the bill’s most outspoken critic, accused the Senate of selling out the nation’s economic health and its commitment to balancing the federal budget by approving a “phony” tax bill that he argued would dangerously increase the federal deficit.

‘Worse Than Phony’

“It’s phony. It’s worse than phony,” Danforth said of the bill’s attempt to raise money by ending tax preferences that benefited the wealthy while lowering tax rates overall. “It’s going to come back to haunt us in the future.”

Meanwhile, as the arguments flowed on the Senate floor, some senators and their staff members circulated updated lists of several hundred tax breaks, estimated to cost the Treasury about $10.6 billion, that had been written into the legislation. The breaks would make it easier for corporations, local governments, real estate developers, schools, colleges, universities, hospitals and sports teams to adjust to a new universe of tax planning.

Coping With Tax Changes

The “transition rules,” as they are called, are technically supposed to help certain public and private sector projects, for which investments had been committed some time ago, cope with sudden changes in the tax code. Typically, they include long lists of “grandfathered” capital projects undertaken more than a year ago by giant industrial, electronic or oil exploration companies.

But, in practice, favorable tax treatment is often doled out as a way to win crucial support for the bill or to make sure that the constituents of key figures in the tax-legislation process are made aware that their interests have been protected.

The transition lists were handed over to the press Friday by Sen. Howard M. Metzenbaum (D-Ohio), who denounced most of them as unfair tax breaks “to take care of certain special interests.”

The lists contain special protection for numerous state and municipal projects, hospitals, real estate developments and industries in Oregon, home state of Senate Finance Committee Chairman Packwood, and in Chicago, home district of House Ways and Means Committee Chairman Rostenkowski.

‘You Didn’t Find ‘Em’

Packwood, told by a reporter Friday that none of Oregon’s tax breaks had been evident in the first version of the tax overhaul bill passed by the Senate last summer, quipped: “That just means you didn’t find ‘em.” The rules usually are disguised in legalistic, nearly inscrutable language.

But the largess seems widespread. House Republican leader Robert H. Michel, a key figure in lining up 116 GOP votes for the tax bill in Thursday’s House vote, won a delay in application of new inventory accounting rules that Metzenbaum estimates will save $78 million in taxes for Caterpillar Tractor Co., the troubled construction equipment company in his Illinois district.

And Michel’s hometown newspaper, the Peoria Journal-Star, gets exemption from new rules for employee stock ownership plans, which Metzenbaum says will cost the Treasury $4 million.

However, in the neighboring Illinois district of Democrat Lane Evans, another equipment company, John Deere, is to benefit by an exemption in accounting rules that Metzenbaum says will save it $212 million.

Sports Fans to Benefit

One class of citizens seems sure to benefit nationwide: sports fans. Scattered through the hundreds of transition rules are exemptions to the tax bill’s stringent new limits on tax-free bond financing of municipal projects that will make it easier to build, expand or renovate no fewer than 22 sports arenas, at an estimated revenue cost of at least $150 million.

Among these are a new stadium in San Francisco to help keep the Giants there and new parking facilities at the Los Angeles Coliseum. Also included are new stadiums in Atlanta, Baltimore, Denver, Memphis, Miami, Oakland, Phoenix and Hudson County, N. J., as well as in Chicago, Rostenkowski’s home, and Cleveland, which is in Metzenbaum’s state.

The bipartisan largess to sports includes college football, particularly in the middle South, where it is a regional mania. Special provisions will permit alumni of the University of Texas and Louisiana State University to make fully deductible contributions to the alma mater of their choice and still continue to receive in return the right to buy season tickets.

Also benefiting from the transition rules are major universities from coast to coast, which will be allowed to carry out plans to use bond financing for various projects. Beneficiaries include Columbia, Pennsylvania, Yale, Cornell, Tulane, Northwestern and Howard.

Historic Buildings

Similarly, several dozen projects for recycling historic buildings to save them from demolition are exempted from the tax bill’s repeal of the tax credit now allowed for rehabilitation projects.

One beneficiary of this will be an apartment project for the elderly in Spokane, Wash.--home district of Rep. Thomas S. Foley, the Democratic whip--to be constructed in a 96-year-old school for Catholic girls, the Holy Names Academy.

Many such projects are simply named in the bill in sections set aside for transition exemptions. But many others--particularly those in Chicago, as it happens--are designated in a manner so arcane as to be incomprehensible to everyone except the actual Joint Tax Committee drafters of the cumbersome 925-page document.

Typical, for example, is this entry: A Chicago real estate project is said to be exempted from bond restrictions “if it is a new residential development with approximately 309 dwelling units located in census tract No. 3202, and there was an inducement ordinance for such project adopted by a city council on Nov. 20, 1985.” Only insiders know for sure.

Staff writer Karen Tumulty contributed to this story.