One Blueprint, 535 Contractors

By Evan Thomas

"Rosty" the reformer? No one who has watched Congressman Dan Rostenkowski cut a deal with a colleague or swing a golf club with a lobbyist has ever called him that. Indeed, as a former Chicago ward heeler and protege of the late Mayor Richard Daley, he seems to be the quintessential machine pol. Yet, by the peculiar dynamic of politics, the chairman of the House Ways and Means Committee has become the point man for the most ambitious attempt ever at overhauling the loophole-laden tax code. "The reform hat I am wearing is not yet comfortable," Rostenkowski cheerfully confessed to the Wall Street Journal last week. Nonetheless, the 14-term Congressman may be perfect for the task. Ultimately, late-night deals, not lofty ideals, will determine the fate of President Reagan's plan in Congress.

Democratic leaders, who could hardly do otherwise, all praised Reagan's < push for reform -- in principle, at least. But on Capitol Hill, Rostenkowski warns, the tax-reform blueprint will be worked over by "535 independent contractors that all have an agenda of their own." Whether the final structure will stand, or even get finished, is highly uncertain.

With a Democratic-dominated House and a Republican-controlled Senate, tax reform cannot succeed without the support of both parties. In the afterglow of Reagan's speech, there were ritual promises of bipartisanship, but old rivalries and resentments are sure to resurface. Rostenkowski, for one, has some scores to settle with the Reaganauts. In 1981 they lured him into supporting tax cuts and then dumped his compromise bill to pass their own. Though he was all sweetness in his TV address, Rostenkowski is "irritated" that the Reaganauts did not include him in their final deliberations on the tax plan. "They haven't talked to me in 2 1/2 weeks," he publicly growled.

Democratic leaders warned that the particulars of Reagan's proposal will have to "pass the fairness test," as House Speaker Tip O'Neill put it. Accusing the President of caving in to the special interests at the expense of middle- income voters, leading Democratic tax reformers like Richard Gephardt of Missouri have vowed to close loopholes for the wealthy left open by the President's plan.

A prime Rostenkowski target will be tax breaks for the oil and gas industry. Fairness is not his only motive. A chief defender of oil and gas interests in the House is Majority Leader Jim Wright of Texas, who also happens to be Rostenkowski's main rival to succeed O'Neill when he steps down as Speaker after next year. To defeat the heavily favored Wright, Rostenkowski may try to paint him as the captive of fat cats.

The Democrats have to contend with their own throng of special interests. Hundreds of lobbyists who failed to win concessions from the White House began lining up three hours early for the first congressional hearing on Reagan's proposal. "I'm walking in an egg field," frets Rostenkowski, a master of malapropism. He knows that a concession to one interest group risks antagonizing others.

Rostenkowski's greatest fear is that interest groups will band together for mutual support. It is widely expected that the restaurant, hotel, liquor and entertainment industries will make common cause to oppose limits on the deductibility of entertainment expenses and business meals. The last time Congress attempted to eliminate the three-martini-lunch deduction (in 1982), it took the restaurateurs all of 36 hours to stamp out the threat.

Already Southwestern oilmen have formed an odd-couple alliance with East Coast Jewish groups called the Council for a Secure America. Their shared interest is to avoid U.S. dependence on Arab oil by encouraging domestic oil exploration. Now the lobbyists who dreamed up that coalition are trying to form a congressional link between Texas (oil and gas) and New York (deductibility of state and local taxes). "We'd have 61 votes in the House," says Dan Dutko of the Council for a Secure America. "It would be by far the largest single bloc on the issue." Congress cannot afford to make too many concessions, because for every deduction they put back into the tax code, they must take one out to keep the package revenue neutral. Rostenkowski did not rule out seeking higher rates than the President proposed. But that risks losing the votes of key Republicans, notably Congressman Jack Kemp, who would like even lower rates.

Special interests rebuffed by the House will have a second and better shot in the Senate. Finance Committee Chairman Bob Packwood of Oregon has promised to have "the bill to the President by Christmas," but some colleagues wonder. Only a few months ago, Packwood said he liked the tax code "the way it is." The drive for reform could be delayed or foiled entirely by the Senate's liberal filibuster rules, which allow a single lawmaker to tie up his colleagues for days and even weeks over almost any amendment he wants to make. Steve Symms of Idaho, up for re-election next year, says he will "support" Reagan's plan but oppose the provisions that adversely affect his state: reduced tax breaks for the timber industry, mortgage deductions for vacation homes, mineral-depletion allowances and investment tax credits for farmers. Says North Dakota Congressman Byron Dorgan: "We're packaging 30 or 40 issues that each would be a major fight."

Tax reform may just be too large a beast for the congressional snake to swallow. As it is, Congress has a full calendar. There is always next year, of course. But by then every member of the House and a third of the Senators will be preoccupied with really urgent business: getting re-elected.

With reporting by David Beckwith/Washington