Clock ticking for tax showdown
The bidding war between President Reagan and the House Democrats to win tax cut votes in Congress intensified over the weekend. "The biggest tax auction in history" is how Rep. Toby Moffett, a liberal Connecticut Democrat, describes the showdown bargaining.
"Both sides have tossed principle aside," says Norman Ornstein, a congressional affairs expert. "Tax bills traditionally involve coalitions, with a Christmas tree effect. But in terms of the dollar amounts involved, this bidding war is unprecedented."
Treasury Secretary Donald Regan concedes the White House abandoned its original "clean" tax proposal because it "did not have the votes to pass it."
It has thus sought to match or outbid the Democrats for the votes of oil state congressmen, adding savings and loan, commodities trading, charitable deductions, estate tax, and other "sweeteners."
Tonight President Reagan, in a nationwide televised address, is expected to emphasize the need to pass his tax plan as part of his overall economic package. He will likely argue again that the Republican version mandates a three-year tax cut, while the Democrats tie the third year cut to the achievement of the administration's economic forecast.
But his larger job may be to make the tax issue seem still relevant to the average voter, because the bidding for votes has pulled the tax debate into the realm of the well-to-do, high-profit, special- interest sector.
The average family could use some tax relief.
According to the Tax Foundation, the median US family is $427 poorer in real purchasing power than it was a decade ago. Its income more than doubled -- from taxes almost quadrupled, and inflation did the rest to erode income gains.
Despite this stake in tax policy, the public does not appear as aroused over tax cutting as it was over the issue of cutting the federal budget -- which produced Reagan's first economic policy victories.
"The public is not all that fired up this time," says Mr. Ornstein, as Congress moves toward a midweek vote on the tax issue. "The political tension is not as high. Congressmen feared the political consequences of opposing Reagan on the budget. The pressures aren't the same on taxes."
"At this point, it's 50-50," Ornstein says. "I'd have to bet on [House Ways and Means Chairman Dan] Rostenkowski." Illinois Democrat Rostenkowski, a protege of the late Chicago Mayor Richard J. Daley, is known to prize discipline in party ranks. As Ways and Means chairman, his backing will be crucial on many issues in future years to both oil state and other Democrats.
"Rostenkowski has a long memory," Ornstein says. "Reagan also has a memory, but he won't be around as long. Rostenkowski has clearly made a good effort to satisfy any reservations of Southerners for his bill. They know it. If they break ranks again, they know there will come a time Rostenkowski will get his revenge." Conceivably, Reagan would turn the tax war in his favor with his address, with pressure in home districts, and a half million dollar Republican advertising blitz in the final countdown days.
But the administration was compelled to sacrifice an early crucial advantage -- the relative simplicity of its across the board cut of 10 percent a year for all individuals, and a business tax cut. Its bill now is just as complex, and more costly than the Democratic version.
"The administration did it out of weakness, because they were losing," observes Ornstein. "The bidding's gone so far now, nobody's going to pull back. They can only hope to rub out some of the excesses in a Senate-House conference."
The cost of the House Republican plan would reportedly be at least $730 billion over the next five years -- an amount greater than the fiscal 1982 federal budget. The Democrats claim their version would cost $113 billion less over the five years.
Ironically, victory for either side has drawbacks politically.
Critics of the Republican proposal foresee a need to raise taxes in the mid- 1980s. Defense outlays will rise, and the administration will not be able to deliver on the further budget cuts it has promised through 1984, they contend.As in many states, where budget crunches have followed tax cuts, those who propose the revenue cuts have had to preside with great discomfort the state's efforts to live within slimmer means. A Republican victory this week would assure GOP accountability later, they reason.
Many Democrats object that their own leadership has led them politically into a blind alley on taxes. Liberal Democrats will have a chance on the House floor to offer an amended tax bill that would delete the oil and other tax breaks. It is expected to lose.
Many Democrats feel they should have stayed with their original one-year to cut, tilted to middle-income taxpayers, with the marriage and estate tax reductions. If they lost, at least it would have been with a bill they could be proud of, they contend.
"What a perfect moment this would have been for Democrats and truly fiscally conservative Republicans to join together in suppo rt of a modest tax bill," says Congressman Moffett.