Voting the Bankers' Way

It was a testament to the strength of postal politics. Besieged by a 22 million-piece mail campaign orchestrated by the nation's banking industry, the House last week voted by an overwhelming 382 to 41 to repeal the withholding for taxes of 10% of income from stock dividends and bank interest. Said Illinois Democrat Dan Rostenkowski, who as chairman of the Ways and Means Committee had reluctantly brought the repeal measure to a floor vote after a majority of the House demanded it: "Today we are conceding control of the tax system to a special interest that has won the day largely by deceiving American taxpayers."

The withholding provision, which was scheduled to go into effect July 1, was a key revenue producer in a $98.3 billion tax package Congress passed last summer in an attempt to whittle down growing federal deficits. The measure would generate an estimated $13.4 billion in new revenue through 1988, mostly by reining in tax chiselers who do not report dividend or interest income.

Bankers, especially those in small-and middle-size institutions, were upset by the administrative burdens of withholding. They bombarded the elderly, the unemployed and other targeted groups with ads and speeches suggesting that withholding was a new tax, not simply the enforcement of an old one.

The bankers' blitz produced an alliance of rank-and-file Republicans and Democrats, who defied warnings by President Reagan. House Speaker Tip O'Neill and other House leaders that repeal would encourage tax evasion and hike deficits. Predicted New York's Barber Conable, ranking Republican on the Ways and Means Committee: "Many who vote for repeal will beat their breasts and bray against deficits."

The withholding issue now goes back to the Senate Finance Committee, which will decide this week whether to recommend acceptance of the House repeal in conference committee. Committee Chairman Robert Dole of Kansas, who filibustered a repeal effort in the Senate, is expected to report out a strengthened variant of a Senate "compromise." passed 91 to 5 last month, that would postpone withholding for four years and, in the interim, step up tax enforcement. Reagan, who in the past has pledged to veto any attempt to repeal or postpone withholding, appeared to soften his stance in the face of the veto-proof votes. Said he: "I'm going to wait and see what they come up with there on the Hill." This file is automatically generated by a robot program, so viewer discretion is required.