Surtax Under Siege

In theory, the surtax is a fiscal mechanism, a key weapon in the fight against inflation. In practice--as two Presidents have discovered to their chagrin--Congress has found it a handy lever for forcing its fiscal views on the Chief Executive. Last year a House coalition compelled Lyndon Johnson to accept stringent budget cuts before they would pass the tax. This year liberals in the Senate are demanding as their price for extending the surcharge a major overhaul of the entire tax structure.

So strong is the sentiment for tax revision that the House would not consider the extension bill until President Nixon promised to send up a reform program later this year. Even with Nixon's pledge, the margin was an almost invisible five votes. The Democratic leadership in the Senate was less trusting. Reform, the leaders reasoned, means one thing to them, another to a President who during the campaign favored retention of the oil-depletion allowance--one of the chief targets of the reformers. Their other goals include a minimum income tax to eliminate the anomaly of some millionaires' paying no tax at all and an end to the no-tax loophole for holders of state and municipal bonds.

Playing the Snake. Liberal Democrats argued that unless they tied the surtax, which Nixon wants badly, to reform, which he does not want quite so badly, reform would remain what it has been for years: something to be done tomorrow. Though the Administration did, in fact, attach a few reforms of its own to the surtax bill as a sweetener, it did not go nearly far enough to satisfy the liberals. While Nixon pledged himself to submit a more comprehensive tax-reform package to Congress this year, he has been less than specific about its contents--perhaps partly because tax revision is so enormously complicated.

Until last week the plot was thus about as involved as Dick and Jane. Enter Russell Long, chairman of the Finance Committee and junior Senator from Louisiana, some of whose campaign contributors look upon a cut in the oil-depletion allowance as something akin to matricide. With scarcely a sideways glance at the Democratic leadership, which wanted delay, Long bolted party ties and brought the surtax, minus reform, to a committee vote. With two Democrats defecting, it was approved 9 to 8. Some saw a trace of hubris in Long's defiance of his party's leadership. Since his rejection as assistant majority leader last January in favor of Edward Kennedy, skeptics maintained, he has been waiting for an opportunity to wreak his revenge on both Kennedy and Majority Leader Mike Mansfield, who supported Kennedy. "Long," muttered one of the reformers, "has started playing the snake."

Opportune Moment. Approved by the House and an important Senate committee, the surtax bill by any traditional standard would appear to be progressing smoothly. In this case, however, appearances are no guide at all. Mansfield does not have to bring the bill to the Senate floor for a vote. And from everything he said last week, he will not do so unless Long's committee couples it with reform.

Mansfield's hope is that the House Ways and Means Committee, which is working on its own plan to revise the tax structure, will get its version of reform passed by the House and the Senate before Congress goes on vacation Aug. 13. Administration economists contend that if the bill is delayed until fall, the battle against inflation may be lost altogether. While the tax will continue to be withheld from paychecks until a decision is made, the wait for final approval, say Treasury experts, undercuts their efforts to slow inflation and brake the economy. On the other hand, the liberals argue, the American public is overwhelmingly in favor of a more equitable tax structure, and they may never again have so great an opportunity to coerce needed reforms from the Administration.

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