The Screwing of the Average Taxpayer

...Getting a genuine reform bill through Congress will be harder...

...As reported by Stern, the Presidential Task Force on Business Taxation, which was appointed in 1969 and eventually thought up the ADR, was made up of: .four lawyers from corporate law firms (including former partners of both Nixon and Connally...

...This does not could appear to check where the seem to be part of the Administramoney was going...

...By turning taxes into a penalty and rewarding those who find the escape clauses, the tax system encourages a pernicious social irresponsibility...

...One or two of them might involve a substantial amount of revenue, but most of them are relatively minor amendments...

...As with other tax preferences, most of the corporate honey gets scooped out by those with the biggest paws...

...no General Accounting Office subsidy for the reserves...

...Another $2.6 billion is lost from the tax-free interest on Slick Operators state and local bonds, $2.7 billion It is not always clear that tax from property taxes paid to local subsidies are the best or most effective governments, and $2.4 billion from way to use government money...

...there is...

...The longest-running of the major preferences, the ITC, shows that the welfare ethic can destroy initiative and fiber among the rich as well as the poor...

...Like Nixon, Mills has sensed a slackening in the taxpayer revolt...

...Americans today don’t...

...two per cent of the people controls 43 per cent of the wealth-the problem is one of waste...

...Neither do they have capital gains or much property tax to write off...

...When the surcharge was imposed, the income tax withholding rates stayed at their old, lower level...

...Property tax exemptions, for example, spared families in the $10-1 5,000 income bracket $642 million in taxes, while giving only $240 million to those in the $50-100,000 bracket and $137 million to the $1OO,OOO-plus bracket...

...But, like the unfortunate ITC, the DISC gives benefits without demanding performance-companies get tax breaks even if their exports are falling.* The star of Nixon’s group, the Asset Depreciation Range system, which will cost an estimated $30 billion in the next decade, was aimed at expanding industrial capacity at a time when 25 per cent of the factories were idle...

...Phasing out the preferences wouldn’t kill them for good, but at least it would make Congress review each preference before re-enacting it...

...The point easily overlooked is that tax breaks are really no different from government spending...

...Don’t Fence Me In When the income tax was first introduced some 60 years ago, the idea was simply to tax all incomewithout fancy distinctions between factory wages, profits from the stock exchange, real estate windfalls, or earnings from the farm...

...In recent years, another reason for progressive tax rates has emerged: if the rich get the largest share of government subsidies and bask in the sun of government spending, then it’s only fair that they pay for what they get...

...While liberals have acted as if government programs could solve any problem (taking more money in through taxes, then spending it), conservatives have placed equally boundless faith in tax incentives (not taking the money in the first place, then not spending it...

...mtwo New York investment bankers...

...If much of the backlash against government spending and high taxes comes from those who see the tax withheld from their paycheck each month, it may be because they are the only people who know for sure they will have to pay their full share of the government’s expenses...

...Even more than other bits of congressional fence-mending, this contrivance set economists wondering whether congressmen ever thought about what they were voting for...

...The catch, of course, is that poor people don’t have oil wells...

...Its effect on taxpayers is like that of a court which imposes harsh sentences but only convicts half the defendants...

...Reversing normal bidding procedure, the government buys services from whoever offers them and lets him set his own price...

...a report, where...

...This “tax expenditure” approach to the revenue system means, most importantly, that tax expenditures should be judged by the same standards of economy and efficiency that budget-cutters apply to other federal expenditures...

...The sideshow this time is property tax relief-a serious enough business, but not enough to steal all the attention from income tax reform...

...present depreciation rate, but going even further than that, so we can get our plants and equipment to be more effective...

...Senators Paul Fannin and Cli ford Hansen offered two further amem ments, but Proxmire blocked then Finally, on Monday afternoon, Senal consideration of the “Insurance Agen Tax Withholding Bill” ended and tl: legislation was sent to the House...

...The next day, October 17, House Wa: and Means Committee Chairman Wilbi Mills moved for a conference with tl: Senate on H. R. 7577 which would, 1 effect, mean passage of the bill...

...Hartke disclaimed knowledge of who the beneficiaries were...

...Alcoa Aluminum, Allied Chemical, Standard Oil of Ohio, and a quartet of s t e elm a ke rs- Bethlehem, National, Republic, and United States Steel-all paid dividends of between $33 and $78 million in 1970 or 1971, without paying any federal income taxes...

...Even if the profit on IBM stock were cut by higher capital gains taxes, few potential investors would be likely to sulk and put their money in a sock, especially if other tax shelters were also dismantled...

...Both dangers were avoided when, earlier in the century, capital gains rates were the same as ordinary rates...

...One of the proposals would have cost $6 billion in lost taxes, in exchange for the possible creation of 500,000 to one million new jobs...

...The taxpayer’s only rational behavior is to try to beat the rap, to hide portions of his income in the preference safety zones rather than paying at the official rates...

...Death of the Christmas Tree One of the heartwarming moments of the 1972 tax season was the defeat of the “Christmas Tree Bill ’’ in Congress...

...The fights that went on were on the other side of the field-trying to prevent new loopholes from being punched through the tax code...

...For the most part, they are not matters of any great consequence...

...fiscal dream-world of Lyndon Johnson’s last few years-when he wishfully imagined he could buy both guns and butter without raising taxes to pay for either-had come apart, spawning the inflation we now know as a permanent part of life...

...Not as spectacular as the deleted items, they would nevertheless have caused a revenue loss of several million dollars: .For the benefit of West Virginia constituents able to itemize deductions, Senator Robert Byrd added a salestax deduction provision shaving $1.5 million off their taxes...

...That is why you have depletion, and the people have got to understand it...

...This would mean either that current tax rates would produce $77 billion more in revenue-several times more than will be needed to cover the expected budget deficit next year-or that the entire rate schedule would be reduced...

...Senators Clifford Case an Ted Stevens added their own litt clauses...

...Friendly Persuasion The choice of these uses for public m,oney-rather than public-works projects, or education investment-may be explained by the groups buzzing around Nixon’s ear at the time...

...Welfare, dozens of times greater than This accommodating system not only anti-Pollution Program, enough to guarantees the country an adequate give McGovern’s much-loathed $1,000 supply of resort motels and luxury grant to a quarter of the People in the apartments, but also allows the rich country- The biggest sin...

...The New Budget Until fairly late in the Johnson Administration, no one bothered to take the dimensions of the taxexpenditure programs...

...The James Fallows is an editor of The Washington Monthly...

...Aside from the unions-who in 1969 were virtually the only reform lobby-there are now several publicinterest groups, like Common Cause, Field’s Taxation With Representation, and Stanton’s Tax Reform Research Group...

...Meanwhile, the remaining parcels are trampled on all the more heavily...

...The enterprising Continental Grain Company has even tried to get DISC tax breaks for its government-subsidized grain sales to Russia...

...So far, his psychology has worked well...

...Forty per cent Budget auditors, and finally a tight- of the tax breaks went either to fisted Executive branch, quick with foreign operators or to “nonoperathe veto...

...On Monday, October 16, Senatc Frank Church picked up where his co leagues had left off by proposing (succes fully) that authors and artists be pe mitted to deduct half the value of the private papers when given to charitab institutions...

...Two veteran tax reformers - C ongressmen Henry Reuss and Charles Vanik-felt frustrated by Iviills’ refusal to push a reform bill through his committee, and so they proposed their own reform measure as an amendment to the debt-ceiling bill...

...Sure enough, Mr...

...Thomas Field, a former Treasury lawyer who recently resigned to set up Taxation With Represen tation, a public-interest lobbying firm, wrote shortly after the bill’s passage that it “may actually have entrenched existing tax abuses more firmly, by reducing the outrageous excesses that scandalized the public, while failing to eliminate the basic abuses themselves...

...Its success in encouraging them to create new jobs and boost the economy is harder to detect...

...Several enormous companies have been able to pay respectable dividends to their shareholders without paying anything to the government...

...This innocuous description intrigued several senators...

...Not about to be outsmarted-especially when still running his quaint race for the presidency-Mills managed to block Reuss and Vanik by introducing a “reform” bill of his own...

...The closest the Act came to tampering with the preferences was a dainty adjustment in the oil depletion allowance (lowered from 27.5 per cent to 22 per cent) and an equally mild rise in the tax rates on capital gains (increasing the maximum rate for gains over $50,000 from 25 per cent to 35 per cent...

...The ITC also has a knack of delivering its benefits where they’re not needed and tugging them away from those who need them most...

...The bill, which started life as a minor change in insurance agents’ taxes, ended up bedecked with many special-interest baubles...

...Since 1962, the ITC has proven its benefit to companies, giving General Motors an average of $40 million each year and the rest of American industry another $2.1 billion...

...In practice, they amount to income redistribution toward the rich...

...Further amendments included a three-month extension of unemployment benefits, permission to add more carbonation to American wines, and establishment of a Federal Financing Bank...

...There is an economist’s logic buried here, in the idea that rich people need a greater incentive to perform a task, but it makes sense for the government only if the rich person’s oil well is five times as good as the poor person’s...

...moved to exempt small shareholders from “collapsible corporation” tax restrictioi Senator Jacob Javits expanded a housin tax subsidy, and Paul Fannin added a ta on bows and arrows...

...The 197 1 version of the tax budget shows a total of $51.5 billion in tax times as much federal money, $750 expenditures-more than the budget million, has been flowing out each for any government agency except year as rent subsidies for the rich, in Defense or Health, Education and the form of real estate tax breaks...

...Until a few years ago, when all, the report concluded, the oil Surrey’s expenditure budget was first industry’s tax breaks cost $1.4 billion prepared, no one need have known but generated only $150 million in about the tax breaks at all...

...The Opposition will soon be in town: Wall Street lobbyists moaning about capital gains taxes, oil men warning of energy crises...

...The minimum tax is a perfect example of cosmetic legislation, which admits by its existence that tax preferences sheltering the rich are not fair, but still refuses to change the preferences...

...Instead, he inserted into the Congressional Record descriptions of 13 “legislative proposals...

...The Screwing of the Average Taxpayer by James Fallows Late this month, as Congress reconvenes, Representative Wilbur Mills will announce that tax reform season is with us again...

...When testifying before the Joint Economic Committee in early 1969...

...When the tax rise finally came, as a 10-percent surcharge slapped on in 1968, it was both clumsy-because it tried to squeeze more money from a tax system whose basic flaws had been known for years-and too late...

...The difference ends up with those in 1969, to the $23 million Congress who buy the bonds, 80 per cent of them in finally approved...

...Few companies needed new investment as much as the Penn Central did, with its yards full of cruddy old machinery and its miles of rusty track...

...When they run out they must for the government in 1969 by the be dragged through Congress again, CONSAD consulting firm, the taxpast the perils of committee chairmen, break approach to the energy crisis eagle-eyed Office of Management and was less than effective...

...But because the Penn Central was losing money and paying no taxes, the ITC gave it no help at all...

...if your income is between $10,000 and $15,000, you save an average of $16.31...

...Houi tax reformers, organized by Tom Stantc of Ralph Nader’s Tax Reform Researc Group, were on their feet to object...

...Senators Robert Griffin and Philip Hart sponsored an amendmefit bailing out the Archdiocese of Detroit for about $50,000 in interest on withheld taxes...

...enough oil in the ground to face with To those receiving them, the tax confidence a future of energy crises payments have special appeal...

...The tax rates have gone up and down over the years, but they still reflect the idea that those who can afford to pay more, should...

...During the sixties, tax breaks like the Investment Tax Credit (ITC) helped drop the share of corporate taxes from 35 per cent of total federal taxes in 1960, to 27 per cent in 1969...

...not...

...and Mrs...

...Usually these bills sail through the House without trouble, but last year, for the first time in memory, they were stopped...

...A Modern P. T. Barnum It may not always appear that way, especially if you look at the Administration’s figures...

...Still, the unions are the only one of these representing a sizeable bloc of voters, and while the union platforms recommend admirably thorough reform, its members are the very people Nixon is trying to seduce with property-tax relief...

...One was the result, simply, of the government’s shortsightedness...

...Barr wound up with warnings of a “taxpayer revolt if we do not soon make major reforms in our income taxes,” and to be sure, there was a lot of talk about both revolution and reform in the following months...

...Average was supposed to say to his wife...

...To take care of the highincome tax dodgers, Congress invented a “minimum tax” of 10 per cent to be imposed on those who would otherwise owe nothing...

...Senator Long said that there wasn’t time to hold hearings on the proposals but that an executive session of the Finance Committee had that week informally endorsed them...

...According to a report by Joseph Pechman and Benjamin Okner of the Brookings Institution, taxes actually take only 32 per cent of income at the upper levels, rather than the 70 per cent of narrowlyrestricted income the charts show...

...If the tax base were widenedto include capital gains, bond income, and all other categories of tax-free income4 would be 35 per cent larger than it is now...

...The oil-depletion allowance compensate the rugged drillers for gives the corporations a $1-billion their unusually risky trade, and to break, and the investment tax credit make sure that America always had provides about $1.5 billion...

...The oil depletion allowance gives an average of 85 cents to the median taxpayer...

...These corporate, tax breaks, like the Asset Depreciation Range (ADR) system and the Domestic In t erna ti on a1 Sales Corporations (DISC), will take billions from the Treasury-an estimated $80 billion in in the next decade...

...Hartke then offered an amendment dealing with the airline-ticket tax, and added the provisions of H. R. 11 158 which would permit C. Brewer and Sons of Hawaii to deduct Puerto Rican sugar plantation losses...

...Anyone who pays all his taxes is a fool or a sucker...

...the rest comes from industry’s retained earnings...

...The important maneuvers will go on in Congress, most of them in the chambers of Wilbur Mills’ House Ways and Means Committee...

...Middle America came out in front...

...and a Saturday night, the amendments kept coming...

...Instead, what touched off the “taxpayer revolt” and led to its product, the 1969 Act, was not so much a concern for the ills of the system as two immediate irritants...

...By comparison to these business lobbies, the few existing reform groups are inexperienced, underfinanced, and overwhelmed...

...In the years since, the old familiar loopholes have been joined, and perhaps overwhelmed, by a host of new ones, most of them the result of President Nixon’s New Economic Policy...

...Since then, corporate taxes have fallen by another 10 per cent, mainly because of the bag of treats Nixon passed out as part of his 1971 economic policies...

...The trick is that there are more people making $10,000 than $100,000, so the money goes further at the upper levels...

...Finally, at 12:02 a.m...

...The resistance that Mills puts up this year may be more serious than last year’s procedural bluff...

...With every man looking out for his own special piece of the action, no one has a stake in cleaning out all the special deals...

...This works out to $6-12,000 per job, with no guarantee that the companies will use the money to hire more men...

...The cover-up operation centers on encouraging the public to look at the bright side of the tax system, emphasizing the positive and keeping the reformers’ complaints in perspective...

...As Congress neared adjoumment, the bill was stalled in the House, and action shifted to the Senate...

...Such extensive changes, Wilbur pleaded, would take months and months of hearings, even though he had held hearings on essentially the same questions before, and was presumably familiar with the topic...

...To what end...

...When the preferences are broken down on a moneypertaxpayer basis, they look a little different, more like feudal dues than anything else...

...Perhaps worst of all, the present capital gains system gives an incentive to early death: for those who can cling to their stock all the way to the grave, all the capital gains that took place during their recently-ended lifetime are declared tax-free...

...Tax reform” becomes a code word for “cutting my taxes,” and the “tax reform” bills are little more than a clumsy package of favors, designed to make everyone think he’s coming out ahead...

...In an administration that uses an axe on the federal budget, lopping off whatever it can, these giveaways show how far a faith in the trickle-down theory of business and government can take politicians...

...The the clause that lets homeowners various tax breaks given the oil indeduct the interest on their mort- dustry, for example, were intended to gages...

...Since an overt rise in tax rates-as opposed to camouflaged rises, in the form of Value Added Tax or otherwisemight undermine the public’s faith, Nixon has tried hard to sell the unbelievable idea that taxes will not go up...

...This was the message in Edward Cohen’s tax-preference charts...

...That ended the “Chris mas Tree Bill” effort for 1972...

...if you make more than $100,000, you save an average of $38,126.29...

...Behind this erosion of the tax base lies an essential difference in political faith...

...Though it was now 9 p.m...

...That evening, Finance Committee Chairman Russell B. Long took the floor to “file a committee report...

...Look at those figures,’’ Mr...

...Deductions for charitaljle contributions are worth an average of 28 cents at the lowest brackets and $I 1,373.56 at the highest...

...Just how much harder depends greatly on Mills...

...Expecting more than this may not be wise...

...This could have been the occasion for a new Republican President to take a swipe at Johnson by closing up the old loopholes or for Congress to insist that the surcharge be replaced with some real reform...

...Tom Stanton, a lawyer with Ralph Nader’s Tax Reform Research Group, pointed out this ruse to the Senate Finance Committee last October...

...tion’s plans for cutting bureaucratic Now that these programs are out in fat...

...One useful method is to deflect attention from a serious question to a minor side issue-as the whole public discussion of civil rights has been focused on busing...

...That meant that at the end of the year, families accustomed to a comfortable rebate from the Treasury found themselves owing hundreds of dollars in extra taxes...

...Thus everyone starts to consider the reformers a menace, and each group of taxpayers clings to its own loopholes and blocks those who try to blow the whistle...

...in October, he said tax reform would be his committee’s first order of business in 1973...

...Then Stanley Surrey-the Treasury’s assistant secretary for tax policy, who now teaches law at Harvard-drew up the first “Tax Expenditure Budget...

...The public is losing interest and so is Wilbur Mills...

...Buying Off the Revolution Then it was over, the energy of the taxpayer revolt spent almost before the bill passed both houses of Congress...

...The tax system has turned into the biggest and most profligate program of government subsidies, piping $55 billion out of the Treasury each year, most of it to the rich...

...At this roughly annual event, members of the Ways and Means Committee sit around a table and take turns suggesting specialinterest tax bills...

...The money that doesn’t come in from one group of taxpayers must be wrung out of the rest, or else taken from other government programs...

...On the surface, tax incentives follow the logic handed down from Coolidge to Ayn Rand and on to Nixon that a dollar not run through the government mill is a dollar ennobled...

...Some of these proposals were previously introduced bills...

...Guaranteed Income The moral of the capital gains story turns up again in the corporate taxes, only with bigger numbers...

...If there were some reliable guide to Mills’ beliefs or ideas, it might be possible to predict what kind of bill will get passed...

...But a tax break, once en- tors”-people who happened to own acted, quietly does its work forever, oil-bearing land but who hadn’t done becoming more valuable as tax rates much to advance oil exploration...

...More worry goes into devising each family’s own tax shelters than in working to make the whole system more fair...

...Treasury Undersecretary Edward Cohen went to Congress last year to show who was getting the tax-expenditure money...

...Other and angry Middle East governments...

...After a few minutes, Mills decided 1 abandon the bill...

...As Nixon indicated last summer the open, they make for amusing to oilmen gathered at a barbecue in comparisons with the normal federal Texas: “I strongly favor not only the income rent subsidies, for example, for state and local bonds, designed to help has shrunk in recent years from the the poor municipalities finance their proj$100 million Johnson requested in twice as much as it saves the cities and 19687 to the $50 asked states...

...Even before the 1971 tax breaks, the 100 biggest corporations paid only 27 per cent of their profits in taxes (compared with a nominal rate of 48 per cent), while smaller corporations paid 44 per cent...

...But in this as in few other things, the President doesn’t have the last or the most influential word...

...In all, the system gives an average of $54.06 worth of tax relief to each taxpayer in the lowest bracket, $245.79 to those at the median level, and $76,042.86 to those making more than $100,000...

...want so much to soak the rich as to be rich...

...Completely apart from issues of wealth and equalitythat the distribution of income has not changed in 15 years...

...The proposals, he said, “involve a relatively small amount of money as revenue measures ordinarily go...

...Called the “Tax Policy Review” bill (or later, the Mills-Mansfield bill, since Mike Mansfield co-sponsored it in the Senate), it would have phased out 54 of the major tax preferences over a three-year period, 18 at a time...

...However satisfying it may be to think of trimming back some government programs, tax incentives don’t look like the solution to the problems...

...Part of the tax system’s story has been that of a closing frontier: larger and larger chunks of the income range have been tucked behind tax-free fences, safe from the government rustlers...

...The one certain benefit of the next few months is the series of studies now being finished by the Joint Committee on Internal Revenue Taxation...

...Time was on their side, and Mills’ heart was not with the bill...

...Pechman and Okner offer several alternate schedules, most of which would cut taxes in the lower brackets while imposing rates no higher than 50 per cent at the top...

...If there was ever a time when the federal tax system was ripe for overhauling, 1969 was it...

...As Philip Stern points out in his new book, The Rape of the Taxpayer (an excerpt of which follows this article), only five per cent of industrial capital comes from the stock market...

...The benefit from capital gains taxes, for example, are roughly these: =if your adjusted gross income is less than $3,000, you save an average of $I .66 in taxes each year...

...1 their surprise, however, they heard tl chair recognize southern Californian Joh Rousselot, who blocked Mills’ motic because of a minor procedural irregula ity...

...mif your income is between $5,000 and $7,000 (more than half the taxpayers make this much or less), you save an average of $7.44...

...The corporate tax measures Nixon announced in 197 1 -aimed at a booming economy, a foreign trade surplus, and a fully employed electorate-show the same combination of high cost and uncertain results...

...His figures have attracted surprisingly little attention in the press, although they are as revealing as the regular federal budget, and far more outrageous...

...At just this unsettling time, Treas ury- Undersecretary Joseph Barr added a second bit of fuel...

...He also added language allowing Americans who control incorporated foreign-investment portfolios to escape taxation at the corporate level...

...Faites Vos Jeux But until the tax base is widened, we are left with a system more like a roulette game than a dependable tithe of income...

...No com- extra oil reserves.* A simpler, cheaper mittees could hold hearings to find solution might be to end the depletion out whether the program was worth- allowance and pay a $150-million while...

...So, because most of the tax preferences are open only to the rich, and because each preference is worth more when you’re in the 70-percent tax bracket, a healthy portion of the tax-expenditure budget goes to supporting our upper class...

...if your income is between $50,000 and $100,000, you save an average of $2,616.10...

...The battle was prolonged, beginning with the Members’ Day session in October, 1971, and winding up a year later when, almost by a quirk, conservative Congressman John Rousselot objected to one of Mills’ attempts to get the bills through the House...

...This is times as much in taxes than he invests estimated at between $6 and $9 bil- in real estate...

...Unless this general tone changes dramatically, it is a safe bet that much of this year’s tax debate will glide over the frozen surface of the tax system without looking at what lies beneath...

...To handle the public resentment that won’t go away, Nixon has applied several of his other proven political tactics...

...AI Capp As Philosopher As its contribution to cleaning up the tax system, the Administration is relying on a classic one-two approach: cover up the little problems and pretend the big ones aren’t there...

...These preferences, loopholes, and rebates make the official tax rates less than reliable guides to who actually bears the tax burden...

...Instead, the Ways and Means Committee will start from scratch, looking over each item on the tax-preference list and deciding what sort of reform package to offer...

...As The New York Times reported in late November, Nixon has decided that the heat is off on tax reform because “the public is simply not as stirred up now about the alleged unfairness of the tax laws as it was earlier this year...

...After the earlier, common-sense definitions of taxable income, the lawyers and accountants ganged up to make the system complicated...

...Working from the 54-item list in the Mills-Mansfield bill, the committee plans to make thorough legal and economic analyses of the preferenceswhat they’re supposed to do, how well they do it, and how much they cost...

...Hole-punching long ago became a ritual in Congress, institutionalized in some thing known as “Members’ Day...

...From the Treasury’s point of view, a preference that cuts tax receipts by $1 million is just the same as a new $1-million spending program...

...William Proxmire took the summaries back to his staff and examined them...

...Let us look at the fact that all the evidence shows we are going to have a major energy crisis...

...Perversion In the IRS One reason for the grotesquely high cost of the tax-incentive program is the perverse logic of tax preferences...

...The maneuver served its purpose well: Mills seemed to be on the side of tax reform, but he didn’t have to support any specific reform, and he was able to squash the Reuss-Vanik bill...

...the richest fifth of the population earns eight times more than the poorest fifth...

...government subsidies have finite time But, as shown by the report prepared limits...

...But because of the oddities of committee procedures, none of these bills will be debated on the floor as such...

...Unless there are signs that this year’s tax “revolt” can resist the small rewards that sated previous revolutionaries, tax reform is likely to go the way of welfare reform and other lost causes...

...The crust tossed out by Congress was a tax reform bill that removed the gaudier, more flagrant abuses-examples muckrakers could use in their stories, the no-tax illustrations that could drive a man mad when he looked at his own depleted paycheck -without tampering with the basic mechanism...

...And, assuming the worstthat brokers all over the country go out of business and no one plays the market-the effect on industry would be less than crippling...

...A second Hartke amendment involved $1 million in penalties currently owed to Treasury by a firm which failed to comply with the advance-notice requirements of Section 367 of the Internal Revenue Code...

...proposed until recently...

...In Senator Long’s words, some had “been before the Committee for a long time,” and some had “been discussed, but...

...an average of $847.24 to those in the $1OO,OOO-plus bracket...

...So far it has failed, thanks mainly to publicity generated by a group called Tax Analysts and Advocates .two top officials of large industriaI corporations...

...This philosQphy was expressed with rare precision by cartoonist AI Capp, writing in a recent issue of Saturday Review-Society as a “distinguished economic and social thinker.’’ “What this country wants,” Capp said, “is more tax loopholes, not less...

...Another innovation, the Domestic International Sales Corporations (DISC), was supposed to encourage exports...

...that have not had hearings...

...Whoever inherits the material only pays tax on gains from then on...

...Even preferences aimed at the rich, like capital gains, seemed to avoid any gross imbalance...

...Eighty per cent of the ADR’s billions will go to the top .002 per cent of the nation’s corporations...

...The Amazing Rubber Man Mills gave an impressive display of flexibility early last year when he suddenly decided that tax reform was a hot issue...

...To avoid that, we have to ptovide incentives rather than disincentives for people to go out and explore for oil...

...A year or two later, after debates, studies, vetoes, and compromises, a Tax Reform Act of 1973 or 1974 will emerge, advertised no doubt as a significant step toward tax justice, a boon to the average man, and the only way to cover the rising federal deficit...

...he noted offhandedly that 155 people making more than $200,000 had not paid any income tax in 1967-21 of them with incomes of over $1 million...

...The last time we went through this cycle, in the months leading to the Tax Reform Act of 1969, there were the same big promises and the same small deliveries...

...It was as if the French mobs had called off the guillotines and uprisings once they got a few crusts of the bread they had originally asked for...

...on Sunda...

...Nixon’s host at the barbecue, John Connally, has waxed equally rhapsodic about the value of the capital gains tax preference, claiming that to end it would not only plunge the Dow Jones average below 500, but also permanently maim U. S. industry as it prepares for the economic battle with the Germans and Japanese...

...As chairman of the Ways and Means Committee, he will decide when to hold hearings, what measures to bring up when, and how firm a push he’ll give the bill in the House...

...As originally written by the Kennedy Administration, the ITC would give benefits depending on performance: the companies that tried hardest to invest more than before, to hire more men, would get the biggest breaks...

...For him, the weathervane is swinging...

...The tax deductions naturally cost the government more when a rich person rather than a poor person uses them: a $100 tax write-off, whether for oil-well drilling or buying state bonds, costs $70 in lost taxes if the taxpayer is rich, but only $14 or $20 for people in the lower tax brackets...

...lion, all nominally going as an incentive to investors...

...But an obliging Congress changed that clause, so that any investment qualifies for the ITC-even if the company invests less than the year before, or uses its investment to automate a few more men out of work...

...In the face of this stand Senator Long dropped amendments that would have been worth an estimated $225 million to five special-interest groups...

...The federal tax code is not a leaking vessel in need of a few patches...

...What Proxmire found irked him enough that the next day, Saturday, October 14, he announced he would “object and fight and oppose as long as I can, any amendments...

...We can’t afford to have that mortgage-deduction taken away...

...and...

...In rise...

...October 15, the Senate adjourned...

...More thorough reform bills are also ready, including one from California’s James Corman that would wipe out most of the major tax preferences and replace tax exemptions with “tax credits...

...In the course of the ensuing floor debate, 19 more special-interest provisions were added to H. R. 7577...

...Lost Crusade Reuss will be back this year, with a “quick-yield” bill designed to close a few loopholes and get a fast $9 billion in extra revenue...

...Senator J. Glenn Beall, Jr...

...Wenator Vance Hartke, acting as floor manager, then offered a series of tax amendments, the first of which was designed to benefit conglomerates that buy out minority shareholders...

...Those who would bleed on the altar of capital gains taxation are not the financiers of a stronger industrial America, but the speculators who buy and sell stock issued years ago...

...The tragedy is that now, even more than in 1969, the whole tax system needs the kind of change a taxpayer revolt implies...

...mthree business-oriented economists...

...This year was not the right time for a tax reform bill to get through, and so it may not mean anything that so many reform bills died at the end of the session...

...a revenue loss...

...To many tax reformers, the “real” issues seem to be either unconnected questions, like property tax relief, or isolated cases of men or companies who have beaten the system...

...But reading Mills’ mind is like reading a weathervane: his homing instinct is toward whatever everyone else is likely to vote for...

...Unfortunately, the latest taxpayer revolt has not come much nearer to the fundamental problems than the earlier one did, having been diverted instead to a few of the gaudier excesses...

...That much in Mills’ bill was encouraging, but its main value to him was as a stalling device...

...Besides, he added, they were unimportant enough that the President could veto them if he wished...

...Punching Holes Last year’s congressional skirmishes provide mixed omens for tax reform in 1972...

...In May, Mills sponsored a tax reform bill...

...There were the charts, broken down by income group...

...If Rousselot had not been seized at that moment by whatever purely parliamentary objection he had to Mills’ bill, those who had been trying to block the bill-Wright Patman and Les Aspin in the House, William Proxmire in the Senate, Tom Stanton of the Tax Reform Research Group, lobbyist Ray Denison of the AFL-CIO and Richard Worden of the United Auto Workers-would certainly have managed to kill it themselves...

...others were Treasury recommendations...

...Another ploy has been to breed fear of change among those who should welcome change...

...item in the taxpayer (through a device too cornbudget is the revenue lost through plicated to explain) to save several special capital gains tax rates...

...But, if revolutions are limited by the vision of their supporters, this taxpayer revolt was quickly stymied by the skin-deep perspective of most of its advocates...

...Lawton Chiles attempted to get a promise from Long that no votes would be taken until a report from his committee was available...

...More likely, it will be yet another touch-up job for our corroded tax system, painting over areas where the acid has seeped out without doing anything serious about what’s wrong inside...

...mthree representatives of corporate accounting firms...

...but in November, he ‘told The New York Times that tax laws weren’t really so bad: “If the income tax law is not unfair, and I know it is not, to the extent that some people have indicated it is, I want the American people to know that...

...Meanwhile, about 30 the $5O,OOO-plus income bracket...

...it is a ship steaming in the wrong direction that must be turned around or sunk...

...What happened is reported by the public-interest group, Tax Analysts and Advocates: On Friday, October 13, Senate Majority Leader Mike Mansfield, speaking to a largely empty chamber, warned that he might have to call up for debate “one or two bills” from the Senate Finance Committee, because a number of senators were interested in adding amendments to them...

...The secret is getting a wide tax base, so that the government takes 50 per cent of something, rather than 70 per cent of very little...