Why the Rich Shouldn't Worry About Tax Reform

...You could tell to whom the amendment applied just by looking at the opening letters of the bill’s first three paragraphs, which spelled out “WWL”-an example of Long’s sense of humor...

...From start to finish, the process of getting helped by a tax expenditure is comparatively simple, unhassled, direct, swift, and unpublicized...

...Open meetings would help even if the congressmen who now talk freely in executive sessions simply made their deals in private...

...But these two sentences in the Wall Street Journal ad explicitly recognize how little control the President has over the congressional revenue committees, Wilbur Mills’ House Ways and Means and Russell Long’s Senate Finance...

...Before a vote could take place, Senator Hollings offered a substitute, which preserved the principle that a majority of conferees must have supported the Senate position on a bill headed for conference, but reaffirmed the power of committee chairmen to hand-pick conferees instead of transferring that power to the majority leader, as we wanted...

...In 1967, for instance, the House and Senate had both passed a welfare measure...

...The letter, which was reprinted as a full page ad in the Wall Street Journal to let the rest of the business community in on some of Belmont’s tranquility, spurred a raging controversy as to just how much money McGovern was going to take away, and from whom...

...The chamber was nearly empty...

...We regarded two other commitments as soft-Hartke’s and Gravel’s...

...The requirement in the 1970 Legislative Reorganization Act that committees publish all record votes has not opened the door to Finance or Ways and Means, for the simple reason that hardly any decisions there are made by recorded vote...

...This is far from a radical reshuffling of the paychecks in America, however, and from past experience, Long isn’t about to accept any of that...

...Fred Harris, a member of the Senate Finance Committee...

...These two committees preside over social security, welfare, corporate and income taxes, excise and estate taxes, tariffs, the national debt, medicare, and medicaid...

...That explains the real value of the filibuster: Admittedly a bludgeon where a scalpel is required, the filibuster is the last resort available to senators who want to prevent the enactment of conference reports that fail to represent a fair compromise between Senate and House versions of a bill...

...They had no interest in fighting to keep these amendments in the bill reported out of conferences with the House...

...Talking like a gambler making a bet during church service, he asked whether there were any objections, and hearing none, declared the conference report the pending business...

...Revenue bills should also be open to amendment on the House floor...

...An example of how the committees can load any tax bill with special interest baggage came in early August, 1969, during the debate on the Tax Reform Act...

...Even though this would create the danger that the House as a whole would ram through more regressive legislation than the Ways and Means committee does under the current setup, it’s worth trying...

...The friendliness extended by the members of Ways and Means and Finance, of course, is not a one-way street...

...When a conference report returns to the Senate floor, that body can vote up or down, but cannot entertain amendments...

...Why, we can vote on the time of day if we want to...

...Since the fact that Long can get his friends on all the conference committees enhances the power and value of a membership on Finance, such membership can be held out as a prize for dissidents who advocate changing the conference system...

...Thus, the Senate has no chance to undo damage done to its liberal amendments after conference...

...Mills has made good use of such devices...

...If adopted, McGovern’s tax and income proposals would rearrange the distribution of income and wealth in a more fundamental way than any scheme ever offered by a man who has come as close to being President as George McGovern has...

...These two committees possess nearly all the direct power there is in the federal government to redistribute wealth and income in America, and without them, neither McGovern’s tax reforms, nor anybody else’s, will have a chance...

...Getting to Gravel The trouble with the conference committees, which must be called every time there are differences between a House and Senate version of a bill, is that they always consist of the conservative senior members of Ways and Means and Finance...

...Senior conservatives who represent relatively safe districts but who can never be elected President or Vice President consider their places on these committees the apex of their careers...

...It works the other way, tooone good reason why Congressman Don Fraser didn’t get on Ways and Means last year was doubt about his solicitude for the special tax amendments...

...There are other advantages...

...Such records are guarded with far greater care than any official history of American involvement in Vietnam or any record of a National Security Council meeting...

...Even with all this, Ways and Means is still leaky in comparison with the Finance committee, which offers the ultimate in document security-no records at all...

...But Senator Long was there, and, seizing a moment when Tydings was absorbed in his mail, he approached the chair, and whispered a request to take up the matter of the conference report...

...Conservatives, and others of different philosophy but similarly benevolent inclinations, have found it relatively easy to win assignment on the two committees...

...Everybody figures that it’s so popular that their riders will have a better chance than anywhere else...

...As it happened, the lack of Bentsen’s and Gravel’s votes made no difference in the outcome...

...Seeing that Tydings continued to sign mail, Long immediately asked unanimous consent for final passage of the conference report...

...Two Senate staff members who helped us count noses said that Long got to both Bentsen and Gravel by promising to do everything he could to secure them seats on the Finance Committee next January, when the Democratic Steering Committee will fill the places vacated by the retirements of Anderson and Harris...

...In this way, a senator who opposes such lopsided power is comforted when some of it is offered to him...

...Best of all, once such an amendment becomes law, the only thing a corporation or individual has to do is file a tax return-which, unlike federal contracts, is protected by law from public inspection...

...This plan would force Congress to review the entire tax structure...

...It is possible that Mills, at least, might go along with some tax reform...

...For quite some time, everything that has been deducted from one paycheck and added to another has been the exclusive business of the men who occupy positions on Ways and Means or Finance...

...One has to be present at one of these votes to understand what is really going on...

...In short, the atmosphere of the revenue committees is far better suited to quiet murmurs than to populist crusades...

...Only the two revenue committees are involved in creating a tax amendment...

...We just make ourselves up as we go along...

...It will be riddled with amendments, delays, confusion, and all the other hexes that revenue committees can cast on unwanted bills...

...Unlike a defense contractor, for example, the intended beneficiary of a tax amendment doesn’t have to plead with at least two subcommittees and two full committees for a line item in an authorizing bill, then repeat the process to make sure his earmarked funds show up in the conference report of an appropriations bill, then lobby the Office of Management and Budget to release the money, negotiate with an Executive agency to sign a contract, and finally get someone to write checks...

...It costs the Treasury around $1 50 million a year...

...Somebody just makes notes on the decisions, not on who voted for them...

...Frequently in recent years, not a single conferee on a major revenue bill has voted on the Senate floor-or in committee-for progressive tax or welfare amendments adopted by the full Senate...

...The Finance Committee has helped defeat, through judo, any attempts to reform the conference reporting setup...

...A friend with long experience at lobbying for tax revisions told me: “I hope to God Common Cause isn’t going to come out for a new reform bill...

...Senator Tydings drew the first floor watch, from 9 to 11 a.m...

...There were recurring reports that Russell Long and Herman Talmadge were personally lobbying against the reform, and that they might affect the votes of senators interested in becoming members of the Finance Committee...

...We can’t stand another one...

...The lobbyists like doing business through the tax laws...

...Every such bill reported by Finance is almost certain to be loaded down with a variety of amendments...

...On the morning of the Caucus, our doubt about Bentsen and Gravel was confirmed...

...When this was accomplished, a spokesman for the committee and a lobbyist for the railroads explained that the amendment would “compensate” the railroads for loss of the seven-percent investment credit...

...The revenue committees are the best place from which to hang these baubles, because they offer their members unparalleled opportunities for providing lucrative benefits to private interests, and without fanfare...

...That way, the opposition can never mobilize its support in anticipation of a clash or decisive vote that will occur on a particular day...

...An Inside Joke An example of the way a tax break comes out in the law is shown by Section 512 of the Internal Revenue Code, which exempts only one institutionradio station WWL, owned by Loyola University-from a tax on income derived by religious institutions from business unrelated to their religious activities...

...Although most members of the budget and opportunity for publicity...

...A Hex on Reform -~ ~ If a President McGovern does not have the support of Mills, Long, and a good number of the people on the revenue committees, the fate of his tax reform, regardless of its original wording or intent, will be the fate of the Reform Act of 1969...

...Our support vanished, and the Hollings substitute carried by a vote of 34-14...

...Neither yesterday’s notes, nor last year’s, nor, presumably, the ones taken during the debate on the Smoot-Hawley Tariff Act of 1930 are shown to anyone on the outside...

...ates tax measures...

...When John Gardner, in connection with an anti-secrecy project at Common Cause, recently wrote to Mills and Long to ask them to take the lid off committee meetings-or at least to publish records of the sessions dealing with the Tax Reform Act of 1969 and the Revenue Act of 1971-Mills said he’d take it up with his committee “at an appropriate time,” while Long replied that people already find out as much as they need to know about his committee...

...At the time, I was a legislative assistant to Harris, and with Peter Edelman of Kennedy’s staff, I made a roster of about a dozen senators who would cover the floor and protect our position when the conference report was called up...

...To go along with its strategic amnesia, up until this year Finance had no rules of any kind...

...Dirksen, for example, chose to become the last-ranking man on the minority side of Finance a couple of years before his death...

...The House has never held a separate, clean vote on the oil depletion allowance...

...The railroad amendment chugged on through the House, the Finance Committee, the Senate, the conference committee, and wound up in the law...

...Not only are the staffs, the press, and the public barred at decision-making caucuses, but committee members alone (and perhaps their assistants) are allowed to read the records of executive sessions of Ways and Means...

...He has been talking about it, and even suggests a three-year phaseout of all major personal and corporate tax loopholes, beginning in 1974...

...Senator Bentsen, for example, had told Fred Harris that he was strongly in favor of the reform measure, and was considering speaking on its behalf...

...There is no chance for an Ellsberg with a prolific Xerox machine at Finance, because the committee keeps itself protected as man did before the advent of the printing press, through showing of hands and through guttural utterances...

...It’s almost traditional to warn that progressive legislation from a President will face a recalcitrant Congress, but the unique features of the revenue committees add up to a special blockade against tax reform efforts...

...In the House, the Rules Committee invariably grants Ways and Means a privilege no other committee enjoys-a closed rule which in effect bars all amendments...

...Strategic Amnesia The revenue committees have preserved their anonymity through all the recent at tempts at congressional reform...

...Even now, the rules are so few, and so flexible, that they hardly interfere at all with Long’s power...

...He showed up, however, about an hour after the Caucus had started, entered the meeting, stayed about five minutes, and departed...

...The most recent of these efforts, the Tax Reform Act of 1969, was trumpeted as an equalizing measure, but in predictable fashion ended up creating at least as many loopholes as it closed...

...Again, nothing from Tydings...

...The probable, or known, willingness of a senator or congressman to help out the lobbyists can be a factor in his favor if he wants to get onto the revenue committees...

...Four of us carefully watched as senators entered and left the closed meeting room...

...That, in fact, is just how Long and several others helped defeat a measure in the Senate Democratic Caucus that would have taken the power to pick the conferees out of the hands of Long, and put it into the hands of the Senate majority leader...

...Meanwhile, Belmont Tobin and the other Wall Street Journal readers can rest easy...

...Our strategy was to object to any request to make that report the pending business, then filibuster any motion to take a vote on it...

...Within the committees, the power of the chairman is extended by the fact that Mills and Long have sole authority to hire or fire majority staff members, thus ensuring loyalty to them...

...The Ways and Means Committee, meeting in executive session with the usual lack of notice, no hearings, and by all accounts perfunctory debate, adopted a special amendment granting the railroads the right to depreciate freight and passenger cars over a seven-year period, for federal tax purposes...

...The problem of how to place better senators and congressmen on the committees is more difficult...

...Once he’s sure of that, the closed rule allows him to preserve every colon and comma just as his committee adopted it...

...The key tallies of both these committees are usually wired up in advance by Mills, Long, other committee members, the lobbyists, and the Treasury-and official approval of any bill is a foregone conclusion registered by grunts, winks, and nods...

...His motion was defeated by a vote of 14-1...

...The ad will probably reassure McGovern’s big contributors almost as much as a hawk would be reassured by a candidate who said that he would eliminate the Pentagon budget, but that his proposal would only be a suggestion to the Joint Chiefs of Staff...

...He won’t bring a bill to the floor unless he believes it will pass...

...Taken alone, this amendment means little, but it was just one of hundreds of similar baubles ironically strung from a bill that was supposed to give the little person a break by removing tax breaks for the rich...

...Russell Long once put down an assistant secretary of the Treasury by saying: “This committee doesn’t have a single rule...

...The result of this is to grant the 25 members of Ways and Means a franchise to say to the other 410 House members-“Take it or leave it, but you can’t amend it...

...Once the conference report was made public, Fred Harris and Robert Kennedy decided to lead a filibuster against it in the hope of postponing the final vote until the new session, in order to allow time to build a national lobbying attack on the measure...

...Senator Mansfield wants to appoint more liberals to the Democratic Steering Committee, which would set the stage for more liberal assignments to the Finance Committee...

...No one saw Bentsen appear...

...A tax break is just as real and lucrative as a subsidy, but it doesn’t look so bad to the public as a direct expenditure...

...Long likes to take up such bills at the end of a sessionusing the pressure for adjournment and the liberal fatigue to good advantage...

...Although Long often makes a great show of declaring he did his best to protect progressive Senate floor amendments, somehow they usually vanish in conferencewhile the special-interest pre visions survive...

...Earlier this year, Senator Harris, who has led the fight for Senate reform for some time, asked the Finance Committee on which he sits to hold all its meetings in public...

...All these provisions concentrate power in the hands of thecommittee chairmen, and they prevent the kind of public exposure that might cause embarrassment...

...Votes would have to be taken, and open meetings would tell us who showed up and who didn’t, whether every .member supported each amendment, the intensity of opposition to a bill, and other kinds of information one does not get now...

...In order not to waste time, he brought a large stack of mail which he began to read and sign...

...It is worth looking at how the committees operate, and what they have done to tax reform efforts in the past, because they will have much more say than the President in whether a plan to shuffle income downward, or any other plan, will be adopted next year-and what the plan will look like once it is ready for the President’s 100 pens...

...This time, Byrd held the gavel for a full 10 seconds...

...Unnoticed in all these numbers, however, was one of the McGovern closing paragraphs, which said: “I am well aware that under our System, only Congress initiV. 0. French is a national delegate coordinator for the McGovern presidential campaign and a former aide to Sen...

...Gravel had given his proxy in favor of both resolutions to Senator Mansfield, and his office had told us that a speaking engagement would make it impossible for him to attend the Caucus in person...

...We were most dubious about this commitment because we knew that Bentsen very much wanted to go on the Finance Committee...

...The committees and their rules do not change, and incredibly, are hardly even noticed...

...There are also no regular chances for other members to conduct investigations or independent hearings, due to the absence of subcommittees...

...The solution is always a new proposal, such as those advocated by this year’s presidential candidates, or a new piece of paper with which to approach the committees...

...Such opportunities are seized frequently...

...The lobbyists from Common Cause and the United Auto Workers, who were the main advocates of the reform, made no secret of the fact that the principal target of this reform was the Senate Finance Committee...

...Everybody keeps asking the candidates what they plan to do about tax reform, while the men they should be asking are Long and Mills...

...McGovern has said he won’t reform government without first finding the money to pay for it, but in the case of the two revenue committees, the money flow probably will never be altered until the procedures of the secret meetings is not beyond reason...

...Neither Long nor Mills permit even personal staff members to attend meetings...

...While the conservatives on Finance base their power on a lack of public scrutiny, a liberal’s power often depends on exposure, and any attempt to reform the revenue committees must take this into account...

...Senator Robert Byrd was presiding...

...My guess is that such a vote, coupled with a determined lobbying effort, might result in a reduction in the depletion allowance...

...The opposite situation governs revenue bills in the Senate...

...The favorite horse is the annual Social Security bill...

...The House version contained several punitive provisions which the Senate as a whole had voted to reject...

...Senators or congressmen will give up considerable seniority on other committees to take last place on Finance or Ways and Means...

...Generally, specialinterest bills are drafted so they appear to apply to a large number of persons, firms, or foundations...

...Despite their vast legislative realm, the revenue committees have no subcommi ttees, no staff for majority party members except for the chairmen, no record of individual votes on amendments and bills, no public access to the mark-up sessions, and almost no rules...

...Why theRich Shouldn’t Worry About Tax Reform by V. 0. French About two months ago, George McGovern wrote a letter to Belmont Tobin, a New York businessman, in an attempt to put to rest some of Belmont’s worst fears about McGovern’s latent bolshevism and his radical tax proposals...

...And finally, Mills at least, is famous for his “consensus” method under which no votes are ever taken until he is assured from a private canvass that the people on the committee will approve a measure, frequently unanimously...

...They were put back in the bill by the conference committee, which met to work on the differences...

...Only close inspection and expert knowledge will show that they really benefit only a small part of one industry, or maybe even one person...

...The provision became part of the Tax Reform Act after a short conversation at the door of the Finance Committee between Senator Long of Louisiana and Washington lawyer Tom Boggs (son of House Majority Leader Hale Boggs, then second-ranking member of Ways and Means...

...We suspected that he had come for the purpose of switching his proxy from “yes” to “no,” and one senator present at the meeting told us he believed that is just what Gravel did...

...They neglected to mention that every other enterprise (barring a small assortment of oil companies, tire manufacturers, and a few others either big enough or lucky enough to swing favors) was losing the credit at the same time, and without compensation...

...Nobody is present, of course, except the committee itself...

...A Gambler in Church Long, in fact, has made a career of outfoxing liberals and opponents, both through the Finance Committee and through is own ingenuity...

...The Eternal Loophole Some people wonder why repeated attempts at tax reform and loopholeplugging have left the actual distribution of income in this country more unequal than it was 30 or 40 years ago...

...The interests who will want him to intervene later will first intervene on his behalf in the committee-assignment process...

...Quite audibly now, Byrd announced that the report had been adopted, and the world’s foremost deliberative body had again made its decision...

...The liberals take this opportunity-the only one they get throughout the entire legislative process-to hook on riders that expand welfare programs or close loopholes...

...The suggestions which I have developed in this field should, therefore, always be regarded as suggestions for consideration by the Congress...

...Other senators, as we have seen, are more feverishly attaching riders to contract welfare and expand loopholes...