"WE'LL GET KILLED ON THIS"

By JAMES CARNEY/WASHINGTON

Frank Luntz, a G.O.P. pollster, can already see the 30-second ad in his mind. It opens with ominous music and a deep voice recounting tales of abuse by the Internal Revenue Service. It cuts to images from recent Senate hearings featuring a priest as one of the agency's innocent victims and IRS whistle blowers testifying from behind screens to hide their identity. Then the voice announces that while Republicans want to overhaul the IRS and scrap the tax code, President Clinton and his Treasury Secretary, Robert Rubin, are defending the status quo. "If you like the IRS," Luntz's fantasy ad continues, "vote Democratic. If you want to send a message, vote Republican."

Unless the President can negotiate a compromise with Republicans on a plan to reform the IRS in the next few weeks, political commercials like the one Luntz dreams of will be saturating the airwaves come next year's midterm congressional elections. It's a prospect that scares Democrats all over town. Except, that is, for one of the most influential of all: Secretary Rubin. He knows that an anti-IRS bill backed by the G.O.P. leadership will move to the House Ways and Means Committee this week, but he has refused to budge on a central Republican demand: that his department relinquish some of its control of the IRS to an oversight board made up mostly of private citizens. So as long as the bill includes the oversight board, it will trigger a Clinton veto. And the Republicans will begin crafting their ads.

A former Wall Street bond trader, Rubin remains untroubled by the political conundrum he has created for his bosses Clinton and Al Gore. He spent nearly two hours last Wednesday on the phone with Representative Rob Portman of Ohio, the bill's major Republican sponsor, but the two couldn't bridge what Portman described as their "fundamental philosophical divide." Rubin argues that giving citizens authority over the IRS "raises very serious issues of accountability and conflict of interest." In other words, as another top Administration official put it, "you don't want IRS agents reporting to the chairman of GM." Even if you set aside those concerns, adds Rubin, "a private-sector board that meets once a month is very unlikely to be effective."

That's why even Clinton, so skilled at co-opting his opponents' issues, went only so far when he proposed his own reform of the IRS after the recent heartrending hearings. His plan called for the creation of 33 so-called citizens-advocacy panels, but he held firm against establishing a private-sector oversight board with power over IRS personnel, policy and budget decisions. In a West Wing meeting before the President's plan was made public, several aides insisted that the Administration not get backed into a corner defending an agency Americans love to hate. But Gene Sperling, the chairman of the President's National Economic Council, ended the discussion by invoking Rubin. "The Treasury Secretary says the [private oversight board] is stupid policy. That's our position."

And that's just fine with Republicans like House Speaker Newt Gingrich. Egged on by consultants who see IRS bashing as a salvation for a party with no unifying message, Gingrich and other G.O.P. leaders want the conflict with the Administration to last as long as possible. For the past two weeks, G.O.P. majority leader Dick Armey of Texas and Representative Billy Tauzin of Louisiana have been debating tax-reform alternatives in front of packed auditoriums across the country on what they are calling the "Scrap the Code Tour." They both hope to turn the public's visceral anger at the IRS into a willingness to replace the existing, complex tax code with something simpler. In Armey's case it's a single flat tax on income; in Tauzin's, an across-the-board national sales tax. But because reinventing the tax code is more complicated than bemoaning the intrusiveness of the taxman, the sessions have focused mainly on railing against the agency.

Clinton's less radical approach to the problem has opponents in his own party. The bill calling for an oversight board is the product of an IRS reform commission co-chaired by Portman and Democratic Senator Bob Kerrey of Nebraska, who could challenge Gore for the Democratic nomination in 2000. In the House, another likely Gore rival, minority leader Richard Gephardt of Missouri, this week will come out in favor of the Portman-Kerrey bill. Proponents are predicting that so many Democrats will abandon the Administration that the bill could pass the House, and maybe even the Senate, with enough votes to overcome a presidential veto. "We're probably going to get killed on this," says a White House official. That doesn't seem to faze Rubin, whose stubbornness stands out in a city of compromise.

--With reporting by Arthur Brice/Atlanta and John F. Dickerson/Washington

With reporting by ARTHUR BRICE/ATLANTA AND JOHN F. DICKERSON/WASHINGTON