The Fat Cat Tax Cut

Out in the real America, from Long Island to Los Angeles, April is tax time, when the average American taxpayer ruefully realizes that someone else must be enjoying all those fancy write-offs and deductions. In Washington, however, April is shaping up as a month when Congress is getting ready to pass even more breaks for the select few.

Spring’s new tax legislation, which must be at least superficially separated from the deficit-reduction package that includes shrinking Medicare spending, doesn’t have a name yet. But it could be called the Big Contributors and Influential Lobbyists Relief Act of 1997. If campaign-finance reform were on the books, the politicos wouldn’t need to pay back their big donors so richly--but it isn’t, and they do.

Of course, that’s entirely in keeping with everything else in the nation’s capital these days. The city is bankrupt of ideas, and money is all that matters. The only imagination that counts involves new ways to raise money.

We now have the first-ever self-crippling scandal involving the top three constitutional officers--the Democratic president, vice president and the Republican House speaker--even as lobbyists and fat cats who gave the embarrassing contributions swarm for what could be the last great special-interest picnic on the Potomac: a budget cutback and follow-up tax-reduction bonanza that has more pork than a cheap Southern lunch menu.

President Bill Clinton, the first Democratic chief executive to encourage multimillionaires to exercise their constitutional free-speech rights by sending him checks, is now worrying about another campaign-contributions development: becoming the first president ever to have two special counsels investigating his affairs. (No, not those--only the financial ones.) A few congressional Republicans have been saying the word “impeachment,” but this isn’t likely to be initiated--as the U.S. Constitution specifies--by the current House of Representatives, because it is presided over by the first-ever speaker to be reprimanded and fined.

But before we get to Newton Leroy Gingrich, a.k.a. the Spotted Newt, it’s necessary to mention the country’s second-ranking constitutional officer: Vice President Al Gore. One major newspaper has suggested that Gore should be nicknamed the “solicitor general” for improperly using his office phone at Motel 1600 to dial Democrats-for-dollars from fat cats during last year’s campaign. Republicans have been quoting a statute suggesting Gore committed a felony, though this obviously is a pot-criticizing-kettle situation. One thing is clear: Gore’s poll numbers and year 2000 presidential prospects are both declining.

Meanwhile, our gadabout speaker has just been described as “political road-kill” by a fellow Republican, New York Rep. Peter T. King. Office pools are being run on Capitol Hill to guess the day Gingrich will announce his resignation--presumably why he hasn’t yet paid his $300,000 fine. If he’s stepping down, he can flaunt public opinion and pay the fine from his political war chest instead of personal funds. And it has also been revealed that Gingrich has Washington’s largest number of 1995-96 political contributors (252), for whom the occupations and business interests have not been revealed, as required by federal law.

Unfortunately, the number of big contributors and lobbyists who have a piece of Gingrich is one of the great unwritten exposes. And the proof is less in the pudding, so to speak, than in the greasy pork feast that’s now taking shape along the Potomac under the misleading banner of deficit reduction.

There was some misplaced oohing and aahing several weeks ago when the speaker suggested that, to further deficit reduction, tax cuts should be postponed. What he meant, it now becomes clear, is that the GOP legislation to reduce Medicare spending by more than $200 billion over the next 10 years should not come in the same package as legislation reducing upper-bracket capital gains and estate taxes by roughly the same amount. Grandma and grandpa might get the wrong idea. They might see the same connection they saw in 1996, which shifted the electoral votes of both Florida and Arizona to Clinton.

So the newly emerging tax package, mirroring much of the existing Senate GOP proposal, will be timed to come separately after the seniors accept “deficit reduction” premised on shared sacrifice and Congress’ sincere commitment to saving Medicare. Alas, the “deficit reduction” in the balanced-budget package is likely to be largely offset by the pork loaded into the tax bonanza waiting in the legislative wings.

The big debate, now underway in Washington’s $1,200-suit gathering places, is whether the “separate” tax legislation can actually start taking shape in the House Ways and Means Committee while “deficit reduction” is before the House and Senate; or whether, in the name of pseudo-decorum, this legislation must wait, unannounced, in the out-boxes of the legislators, lobbyists and Capitol influence-peddlars who’ll be drawing it up.

Gingrich was certainly correct in telling the overenthusiastic tax-cut zealots in the House GOP caucus--the so-called Republican Shiites--that tax cuts are no longer a heart-throb priority with the electorate. In fact, the last time they worked for the national GOP was with Ronald Reagan’s tax cuts in 1986. Since then, GOP presidents, hopefuls and nominees--including George Bush, Bob Dole, Gingrich and Jack Kemp--have all been gored by tax-cut politics and miscalculations in situations ranging from Capitol Hill maneuvers to presidential primaries.

What Gingrich doesn’t say is that the reaction of ordinary voters to tax cuts is no longer the key for either party. The new imperative, in this age of million-dollar campaigns, is whether tax favors unlock more political contributions from multimillionaire donors. Clinton and Gore realize exactly the same thing. This is why Republicans assume that Clinton, unrepentant lessor of the Lincoln Bedroom, will, after a certain amount of public protest and back-room deal-cutting, sign the tax bill.

And Clinton probably will. He and Gore and Gingrich may be too crippled to conduct important business, such as an upright foreign policy in Asia and genuine reform of campaign practices at home, but they’re not too crippled to orchestrate passage of a deficit deal that will include in-tandem tax goodies for big givers who have learned the golden rule of Washington: Those with the gold rule.

No one can be sure what the new tax package will cost, but several organizations have already done cost-benefit analyses for the Senate GOP tax proposal introduced in January. During the first five years, tax cuts for the middle class will appear larger, but in the next five years, the big-contributor breaks--capital-gains tax cuts and decimation of the federal inheritance tax--take over.

In that proposal, the capital-gains cut alone would cost $133 billion over 10 years, according to the conservative Republicans who run the Joint Congressional Committee on Taxation, and $237 billion according to the labor-funded liberals who run Citizens for Tax Justice. The true number, somewhere in the middle, would have to be paid for by massive cuts in programs for ordinary Americans or by a resurgence of deficit spending--and this on top of the accounting gimmicks already being readied to grease the tax package.

Broad new investment incentives obviously aren’t needed, though, because over the last six to eight years, people have poured money into investments under the current tax provisions. Specific relief for farmers, small businesspersons and homeowners may make sense, and also indexing for inflation, but that’s a different issue.

What’s unacceptable is giving tax breaks in the $200-billion range over a decade to a small fraction of the population that overlaps substantially with the donors who’ve just flooded the Democratic and Republican Parties with a record half-billion dollars of campaign contributions. It’s wrong to reward the electoral equivalent of bribery. Blocking the pork feast, by contrast, would send a far more useful double message: Reform of campaign finance not only takes priority, it is already underway.