Children’s Ad Is a Ruse in Insurance Industry Rivalry : Politics: Advertisement claiming big business is getting tax breaks while kids go hungry was one faction’s attempt to get a tax break.

The newspaper advertisement was designed to pull the heart strings, and to generate public outrage over back-room deal-making in Washington.

On one side of the page, a group of lobbyists and politicians were shown huddling.

On the other side, a group of small children, with sad and plaintive expressions, stared silently into the camera. Under the picture of the lobbyists, the ad said: “They get a $1.2-billion tax loophole.” Under the picture of the children, it declared: “They don’t get enough to eat.”

The ad was part of a Washington media blitz ostensibly mounted by a group calling itself the “Coalition to Close the Loophole and Put Our Kids First,” whose honorary chairman is former Los Angeles Mayor Tom Bradley. The coalition includes a wide array of social advocacy groups, led by the Washington-based Community Nutrition Institute, which are concerned that childhood nutrition programs are being starved for federal resources at a time when big business is still winning lucrative tax breaks.

“Why should giant corporations get a $1.2-billion tax loophole when a hungry child can’t get $3.50 for day care meals?” the ad asks.

Yet behind the ad campaign lies a very different story, a classic Washington tale of political infighting and hardball lobbying.

The ads were financed by Transamerica Occidental Life Insurance Co., a Los Angeles firm that is angry because its rivals get a special tax break. The campaign shows the lengths to which lobbyists are willing to go to take advantage of the frenzied battle over President Clinton’s budget.

For years, the life insurance industry has been divided into two warring camps over tax policy--the mutual life insurance firms, which include such giants as Prudential, Metropolitan and Northwestern; and the stockholder-owned life insurers, which include Aetna, Cigna and Transamerica. The stockholder-owned life insurance companies are unhappy because the mutual firms get certain favorable tax benefits.

“It is like a religious war, it is like the Protestants and the Catholics fighting in Ireland,” noted Rep. Fortney H. (Pete) Stark (D-Oakland), who has been deeply involved in insurance tax issues in the House.

In the last few years, leaders of both insurance factions have tried to maintain a truce, curtailing their lobbying efforts. Industry sources said that the mutual and stock firms have been trying to hammer out a permanent peace on tax policy in recent months to settle the matter once and for all.

Yet Transamerica Occidental, a subsidiary of Transamerica Corp. of San Francisco, recently launched what others in the industry angrily called the lobbying equivalent of a “terrorist attack.” The American Council of Life Insurance, a major trade group with members on both sides, issued a statement last week strongly condemning the ad campaign.

The Transamerica media campaign not only upset the rest of the industry, it surprised and irked the Clinton Administration. Although the White House does not have any proposal in its budget dealing with the tax provisions in question, it does not want outsiders muddying the waters in the midst of the critical budget battle.

“This ad campaign is incredibly heavy-handed,” noted Les Samuels, assistant secretary of the Treasury for tax policy. “And I don’t understand what they are trying to do, since there isn’t anything in the budget on this, either in the Administration’s version, the House version or the Senate version.”

What Transamerica was trying to do was take advantage of the ongoing scramble in Washington for new sources of revenue to fund social programs at a time of budget austerity.

And, even though the mutual life insurance tax exemption was not being debated in the congressional negotiations, when the Senate voted out an austere budget that scaled back many of Clinton’s anti-poverty measures--including the Administration’s proposed expansion in the food stamp program--Transamerica saw an opening and started its campaign.

“I think they figured this was a good time to get the issue in play and that, if they didn’t get it in the budget bill, they could come back to it when Congress deals with some other big piece of legislation, like health care or welfare reform,” said a Washington tax lobbyist familiar with the issue.

By Monday, Transamerica, having made its point, pulled the plug on its advertisements.