The Hottest Ticket in Town

By GEORGE J. CHURCH

A seat will guarantee a legislator the chance to sit through hours of grueling haggles in a smoke-choked committee room, and to be besieged mercilessly by hordes of lobbyists afterward. But the upside is irresistible: an opportunity to make history by deciding the details of a bill that will touch the wallet of just about every citizen. And so the most coveted ticket in Washington has become a seat on the House-Senate conference committee that will meet, probably the week of July 14, to put in final shape a radical overhaul of federal tax law. With billions riding even on technical provisions, says Norman Ornstein, an expert on Congress at the American Enterprise Institute, the tax-bill negotiations "will be the conference of the century."

In one sense, to be sure, the outcome seems virtually foreordained. That some sort of sweeping tax revision will be enacted this year became a near certainty early last week when the Senate passed its version of tax reform, 97 to 3. The lopsided vote demonstrated that the idea has at last caught enough of the public imagination to develop an overwhelming momentum. It appears almost inevitable that the conference committee will indeed resolve differences between the Senate bill and one that the House whooped through by voice vote last December. The committee compromise should clear both chambers by Labor Day, and President Reagan will undoubtedly sign the final product into law. By now no one dares become known as the politician who killed tax reform.

But what kind of bill will it be? The Senate and House measures have the same broad outline: each would lower and simplify income tax rates and offset the revenue loss by killing hundreds of exceptions and deductions. Yet they differ in dozens of all-important details. One example: the House bill preserves but the Senate measure ends for most people the deductibility of annual contributions to Individual Retirement Accounts. Should the Senate version prevail in conference, that one provision would cost taxpayers $25.5 billion over the next five years.

With so much at stake, Senate Finance Committee Chairman Bob Packwood and House Ways and Means Committee Chief Dan Rostenkowski, who will probably be cochairmen of the conference, are mulling unconventional ways of choosing other conferees. Normally, the most senior members of the Senate and House committees would be selected, but Democrat Rostenkowski is considering appointing his closest allies, senior or junior. Republican Packwood, in contrast, talks of bringing along all 20 Senators on the Finance Committee to face as few as eight Representatives. That would not pack the conference, however, since all decisions have to be approved by a majority of the delegates from each chamber, voting separately.

Once the conferees begin meeting, they will bump up against a basic difference between the two bills: the Senate version is much less generous to the middle class. It radically simplifies the present 15 income tax rates officially to only two, 15% and 27% (though in some cases rates could range up to 32%). In doing so, the Senate measure eliminates many deductions heavily used by middle-income taxpayers that the four-rate House bill would retain. Among them are the provision on IRAs; deductions for interest on consumer loans and on investments (cost to taxpayers of the Senate measure: nearly $28 billion over five years); and full deductibility of state and local sales taxes (cost: $17.5 billion). By one count, a family earning $30,000 to $40,000 would save $301 annually under the House bill but only $129 under the Senate plan.

House conferees will be out to persuade their Senate colleagues to restore as many tax breaks for the middle class as possible. Yet, where to get the money to pay for this generosity and keep the final bill "revenue neutral" ? All participants agree that the bill should neither raise nor reduce total tax collections, in order to keep reform from getting caught up in endless budget hassles. No tax increase is contemplated in the fiscal 1987 budget resolution that Congress passed last week. The resolution supposedly meets deficit-reduction targets by slashing military spending, though keeping social outlays higher than Reagan had proposed.

One way to preserve revenue neutrality while helping the middle class might be to impose higher taxes on the wealthy. But the Senate bill's top tax rate of 27% (vs. 50% now and 38% in the House measure) has so caught the public fancy that it probably cannot be increased much. That leaves one other source: business. And that leads to a second basic difference: the House bill raises taxes on business by $140 billion over the next five years, the Senate measure by "only" $100 billion.

That disparity gives business lobbyists a last chance to pull off a kind of economic Dunkirk--and justify their high fees--by salvaging something for their clients out of a heavy defeat. They are already swarming around every legislator who might be selected for the conference committee, and lining up local clients to buttonhole lawmakers at home during Congress's two-week July 4 recess. Says Wayne Thevenot, a lobbyist for real estate interests, which, he figures, stand to lose as much as $60 billion: "We're getting the wet-leg treatment. That's when somebody pees on your leg and tries to convince you it's raining and he can't do anything about it."

Somewhat easing the conferees' task, many identical provisions appear in the two bills. Examples: both would entirely remove from the tax rolls some 6 million people below or just above the poverty line, and both would revive the so-called marriage penalty by ending the special deduction for families with two wage earners. Another good omen for the conference is that Packwood and Rostenkowski, who have had some testy exchanges in the past, are now talking friendly compromise. Says the Chicago Congressman: "The challenge is to take the best reforms from each" bill. Echoes the Oregon Senator: "Neither one of us will have pride of authorship." But the differences between the two bills are substantial enough, and the public pressure for agreement intense enough, to test the compromising skills of the most amiable legislators.

With reporting by Jay Branegan and John E. Yang/ Washington