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Showdown at Gucci Gulch by Jeffrey H. Birnbaum and Alan S. Murray (Random House: $18.95; 313 pp.)

August 16, 1987|S.C. Gwynne | Gwynne is editor of California Business magazine

There is a certain grim--and probably very American--satisfaction reading about the tax reform of 1986 because, while the tax bill was quite obviously a stunning victory for the average citizen, it was also a gut-wrenching disaster for the "special interests" and their swarms of lobbyists. There is something thoroughly satisfying about watching a lobbyist take it in the chops, particularly when the commonweal is at stake. Jeffrey H. Birnbaum and Alan S. Murray's book, "Showdown at Gucci Gulch," takes its name from the corridors outside congressional committee rooms, where men in expensive suits and Italian shoes wait to buttonhole politicians. The book is an engaging, sometimes astonishing, occasionally pedantic account of how they were beaten.

By all precedents, they should have won. Tax reform, or what passed for it for most of the 20th Century, was usually an occasion for the capital's 20,000 lobbyists to start salivating. Wilbur Mills had failed to accomplish it in the 1950s, as had John F. Kennedy in the 1960s and Jimmy Carter in the 1970s. As the list of deductions, exclusions and credits had grown, the tax system in America had become so riddled with loopholes, so patently skewed against the lower and middle classes that real reform had been reduced to cynical campaign rhetoric. The resources the special interests brought to bear against reform were staggering. Political action committees funneled millions into the coffers of members of the Senate Finance Committee and the House Ways and Means Committee; fund-raisers were held every night of the week during the debate as politicians cashed in on the sudden largesse of corporate benefactors; lobbyists were paid up to $400 an hour to loiter in the corridors of power. There had never been so much money spent to stop a bill in U.S. history.

What they were afraid of was the most sweeping reform since the income tax began in 1913, one that removed millions of low-income workers from the tax rolls, eliminated most income shelters and ensured that corporations would bear a fair share of the burden. It was a reform spurred by the public's disgust with a system in which a family earning $12,000 paid more in taxes than Boeing, General Electric, Texaco and DuPont combined; in which investors in real estate shelters could get $2 or more in deductions for every dollar invested; in which the corporate contributions to government revenue had plummeted from 25% in the 1950s to 6% in 1983. Its passage meant simply that the clients of the lobbyists stood to lose millions or even billions of dollars.

Reform did not come easily. Wall Street Journal reporters Birnbaum and Murray paint an obsessively detailed portrait of backroom compromise, political horse-trading and venal interest-mongering. From it several heroes emerge, most notably New Jersey Sen. Bill Bradley, whose idea it had been; House Ways and Means Committee Chairman Dan Rostenkowski, who muscled the bill through the lower chamber, and--least likely of all--Senate Finance Committee Chairman Bob Packwood, who reversed his position as a staunch advocate of tax breaks to shepherd the bill through the Senate.

It was Bradley's radical notion, above all, that sustained the reform against the dozens of formidable challenges that nearly buried it. His plan--back in 1982--was to trade the raft of special tax breaks for a simplified system based on vastly lower rates. Its genius was to balance the drastic hike in corporate taxes with an equally drastic reduction in taxes for ordinary people. The effect was to induce congressmen to turn their backs on their large benefactors in favor of their constituents.

Bradley's bill would never have seen the light of day, however, had it not been supported by Ronald Reagan: Only a Republican Administration, after all, could get away with such a huge increase in corporate taxes. The idea was picked up by Reagan in his 1984 State of the Union speech, largely because he feared that the Democrats would use tax reform as a campaign issue (he was wrong: Mondale quickly backed off). It was developed by Donald Regan, who as Treasury secretary showed an uncharacteristic flair for special-interest bashing. It was nearly buried by the Republicans in the House, then later again by the frenzied lobbyists in the Senate.

Exactly how the special interests were beaten is found in the authors' excellent account of Sen. Packwood's startling change of heart. Packwood presided over the Senate Finance Committee as it began to hack away at the heart of Rostenkowski's bill.

"The trend of giveaways, once begun, could not be slowed. Each day, the committee not only failed to eliminate or curtail tax breaks but they approved new breaks that were more generous than existing law. It was the kind of special-interest spectacle for which the Finance Committee was well known."

Instead of bowing to his benefactors, Packwood, whom the authors call the chief beneficiary of all that lobbying money, made an abrupt shift. Over "two pitchers of beer" at lunch with an aide, he decided that the only solution was to go "radical." Within a few weeks, his Finance Committee passed the Senate version of the bill 20-0. By so doing, he turned an unpassable bill into an unstoppable force.

The tale of tax reform is an encouraging one, not in the least because it underscores the main principle of this democracy: that the inevitable clash of selfish special interests should result in government that responds to the needs and wishes of the people.

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