Bradley Seeks Cutting Business Tax Breaks to Fund His Agenda

Bill Bradley on Tuesday proposed eliminating $125 billion in corporate tax shelters, loopholes and other subsidies to help finance new programs, including health care coverage for every American.

Harking back to his work in 1986 on major tax reform legislation, the former New Jersey senator said that the driving principle behind his proposal is fairness. He noted that even in a time of unprecedented economic prosperity, tax revenues from big corporations were declining, leaving individuals and smaller companies heavily taxed.

But at the same time, the proposal from the Democratic presidential hopeful implicitly addressed criticism from rival Al Gore. The vice president has repeatedly charged that spending on Bradley’s health care plan alone would deplete the entire federal budget surplus over 10 years, leaving no money to shore up Social Security or Medicare, or pay for other programs.

Gore suggested that Bradley’s embrace of the issue is merely a campaign tactic.

But more neutral observers gave Bradley credit for at least tackling reform of the labyrinthine federal tax code--a favorite Republican cause--which has grown enormously more complicated since Bradley’s work on the 1986 overhaul.

Joel Slemrod, professor of economics at the University of Michigan Business School, said Bradley’s plan is “fairly small potatoes” in terms of its effect on the economy.

“But it needs to be analyzed in terms of whether this is reform in the right direction,” he added. “I think these are important things. I think it is courageous in the sense that this may be the first major candidate proposing something that’s going to increase taxes.”

Martin Regalia, chief economist for the U.S. Chamber of Commerce, said Bradley’s plan is misguided.

“I don’t think he’s looking in the right place and I don’t think he’s looking in the right direction,” Regalia said. Taxing corporations ultimately hits employees, customers and stockholders, he said.

Bradley’s plan has several components, and he outlined some of them while speaking at a New Hampshire business association forum.

For example, he would cut $2 billion over a decade in subsidies to mining companies, oil and gas producers and ranchers. More than $22 billion in tax breaks benefiting chemical companies and foreign subsidiaries should also be repealed, he said.

The federal government also could gain another $10 billion a year by stepping up audits of multibillion-dollar corporations, stiffening penalties on improper corporate tax filings and banning other legal maneuvers, he said. All told, he said, the various changes would save up to $125 billion over 10 years.

Bradley said he would would put the money into the general fund for the federal budget.

Economists said that, although the ideas are sound, they would be tough to implement with a Congress that has routinely rejected such change.

“It’s probably possible to change the laws in question, and probably desirable,” said Aaron Edlin, also a professor of economics and law at UC Berkeley. “But that will require a lot more work.”

The amount of money saved, less than 1% of the budget, “is not dramatic,” he added, “but it’s not minimal. One percent of the budget is real money.”

Political analysts said that the proposals are still a shrewd move on Bradley’s part that could give him needed fiscal credibility against a foe who has attacked him as a big spender tied to special interests.

Gore did not comment on Bradley’s proposal, but his spokesman Chris Lehane did, saying that Bradley “discovered this issue only after becoming a candidate for president. Let’s not forget that in 1992 and 1993, Bill Bradley fought for a special-interest tax loophole that was a bonanza for the pharmaceutical industry.”

Lehane noted that then-Sen. Gore voted against that proposal in 1992.

Bradley spokesman Eric Hauser retorted: “Once again . . . the Gore campaign reverts to the narrowest, most political response they can find.”

One subsidy Bradley said he would not end would be for Iowa farmers’ production of ethanol, sticking to an about-face he has made since running for president. As a senator, Bradley lobbied against ethanol subsidies.

But with crucial caucuses there coming up Jan. 24, he said: “I’ve listened to a lot of Iowa farmers, and I’ve come to understand why they need this subsidy.”

Experts said that, although Bradley’s proposals are a drop in the bucket compared to the total budget, the issue is important because huge accounting firms and their corporate clients have come up with myriad schemes to avoid taxes in recent years.

Eugene Steuerle, a senior fellow analyzing budget and tax issues at the Urban Institute in Washington, said total tax receipts for the federal government would average about $2 trillion annually for the next five years. Bradley’s proposals, if they were all successful, would add slightly more than half of 1% to that.

“On the other hand, it’s a classic case of what’s appropriate, no matter what the bottom line,” he said. “It’s worth it if they should be paying taxes and other people shouldn’t.”

But Regalia, of the chamber, said: “It’s not a whole lot of money if it isn’t your money. If it’s coming out of a select group of firms in the economy, it could be a substantial amount of money.”

Other economists warned that reforming the system would be difficult.

They noted the bulk of Bradley’s projected $125 billion would have to come from closing loopholes by changing the laws. Similar changes proposed by the Clinton administration this year were shot down by Congress.

“These are things that have been sitting there that haven’t gone away because there are people who want them to stay,” said Alan Auerbach, professor of economics and law at UC Berkeley, who said campaign contributions to Congress help keep the loopholes in place.

Corporations have been particularly successful at shipping profits to foreign countries, then bringing them back to the U.S. to be taxed at a lower rate, many said.

Bradley took aim at one corporation by name, saying he would repeal a 1997 loophole that made it easier for Amway Corp. to “park profits in foreign subsidiaries to avoid paying U.S. taxes.”

He said the loophole had cost $270 million over 10 years. He said Amway and “affiliated donors” had given more than $4 million in soft money--largely unregulated donations to political parties--to the Republican Party, including $1 million in April 1997.

The tax bill passed three months later.

Amway officials could not be reached for comment.

Many in the New Hampshire audience were enthusiastic about Bradley’s plan, even though it targets businesses.

“It’s thoughtful . . . he’s a straight shooter,” said Howard Moffett, a lawyer based in Concord, New Hampshire’s capital. “I assume it might bother some of [my clients], but, frankly, it makes sense.”

Gore scored points on Tuesday as well, picking up a big endorsement from Sen. Edward M. Kennedy, a Democratic stalwart well-respected throughout New England. Earlier this year, Gore won the endorsement of Massachusetts’ other senator, John F. Kerry.

Bradley said he was not surprised “because [Kennedy] is part of the entrenched power, and so is Al Gore. . . . When you hold all the Democratic Party fund-raisers, when you arrive by Air Force Two at campaign stops, that’s entrenched power. All I have is the people.”

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Times staff writers Mark Z. Barabak and Ed Chen contributed to this story.