Effort to reform IRS loses steam in Senate GOP dawdled on bill, now must share credit


WASHINGTON -- On the second day of the second round of incendiary hearings on the Internal Revenue Service last week, the witness list promised to please a crowd: Three honest taxpayers were to detail how gun-wielding IRS agents had attacked them.

Inside a cavernous Senate chamber reserved for occasions sure to attract a crowd, long tables had been set aside for the press. Yet only half the seats were filled. And though the tales of IRS hubris and incompetence were as compelling as those spun during jaw-dropping hearings in September, Capitol Hill was remarkably subdued.

By the time the hearings came to a quiet end Friday, Democrats -- and even some Republicans -- were marveling at how Republicans had apparently fumbled an issue that that had seemed a sure-fire way for them to win the hearts of an IRS-hating public in an election year.

"I'll try to be diplomatic," grumbled Rep. Rob Portman, the Ohio Republican who drove IRS reform legislation through the House in October only to see it stall in the Senate. "I wish we'd finished this [legislation] a lot sooner."

The Senate is expected to pass a sweeping overhaul of IRS management and oversight this week. But the fervor over the issue has dimmed significantly since a Republican-led push for IRS reform took the capital by storm last year. Now, some Republicans say, they may well have to share credit with Democrats for the passage of legislation.

"We don't feel like we lost this issue completely, but we're certainly striking while the iron isn't quite as hot," conceded Terry Holt, a spokesman for the House Republican Conference. "You can draw something out excessively."

Last September's Senate hearings -- and the furor they incited -- had caught Democrats in Congress and the White House by surprise, knocking even the sure-footed President Clinton back on his heels.

With House Democrats abandoning Clinton's position in droves, White House advisers dispatched a reluctant Treasury Secretary Robert E. Rubin to Capitol Hill on Oct. 21 to abruptly announce the president's support for an IRS bill that the White House had previously denounced as a dangerous way to give big business influence over tax policy. The bill would pass the House by an overwhelming 426-4.

For Democrats, it was a humiliating setback, for Republicans a rare triumph. Congress was about to pass popular legislation with little fear that Clinton could take the credit.

But when Senate leaders announced that they would take their time with the bill, Portman bet House leaders that Clinton would not only claim credit for the bill but also beat up Republicans for dragging their feet on it.

Sure enough, at his State of the Union address, Clinton exploited the delay: "Like every taxpayer, I am outraged by the reports of abuses by the IRS," he intoned. "We need new citizen advocacy panels, a stronger taxpayer advocate, phone lines open 24 hours a day, relief for innocent taxpayers. Tonight, I challenge the Senate as your first order of business, pass our bipartisan package of IRS reforms -- now."

Within days, Senate Democrats audaciously threatened to attach the IRS bill to other legislation in order to speed passage, claiming the reform mantle for themselves. They even took to ridiculing Republicans for stalling action.

This week the Senate is likely to pass its bill to create an independent IRS oversight board, improve worker training, give top managers more control, strengthen the agency's taxpayer advocate and give taxpayers new rights, including the ability to sue the agency for wrongful audits.

"The Senate guys have their heads stuck in the sand if they think they're getting a gold star for this now," fumed a House Republican aide who worked on the bill. "The Republicans really missed an opportunity here."

Once-silent Democrats have found a voice on the issue, seeking to take credit for the legislation while also tarring the hearings as political overkill. Where last year they barely raised a peep at the hearings, this time Democrats complained that the proceedings were one-sided, that the audience was not allowed to hear the IRS' side of the tales of abuse, and that a defanged tax collector would encourage tax cheats, saddling honest citizens with a larger share of the tax burden.

Confident that they had established their bona fides as IRS reformers, Democrats had decided they could also stick up for those taxpayers who feared that a drumbeat of IRS bashing might encourage tax scofflaws.

Senate Democratic Leader Tom Daschle was emboldened to denounce "the tyranny of the committee" for withholding the hearings' witness lists and testimony until just before the curtain raised. He even asserted that Republicans were "afraid someone will find out some of these witnesses are not that credible."

For instance, John Colaprete testified of a harrowing raid by armed IRS agents who stormed his Virginia Beach restaurant, pulling the forks from diners' hands, ransacking the place, then, when they declined to pursue the tax matter, dumping his belongings onto the restaurant floor without an apology and letting him sort out the mess.

But Colaprete left out portions of the story that dampen the shock value of his tale. Sources familiar with the case even questioned whether Colaprete was completely honest when he testified that he was in church for his son's first Communion when agents raided his home.

W. A. "Tex" Moncrief Jr., a wealthy Texas oilman, told of 64 armed IRS agents who burst into his office "like an army landing on an enemy beachfront."

But Moncrief also said he paid the IRS $23 million to settle the case, while admitting no wrongdoing.

Even so, Democrats, and even Portman, said the litany of IRS abuses proved that reforms are long overdue.

"These problems were well-documented a year ago," said Rep. Benjamin L. Cardin, the Baltimore Democrat who helped write the House legislation. "The Republicans are causing problems for themselves because there's a solution now, but they appear to be more interested in getting headlines than [in implementing] that solution."

Senate Republicans defended the hearings, saying each day they discovered new instances of mismanagement that would be addressed as amendments to the IRS bill.

And they are still using the issue to appease their conservative base and raise the party's cash flow, attacking the IRS in a new series of fund-raising letters.

"My sense from everything I've watched is this is certainly still an issue that resonates," said Ed Goeas, a Republican pollster.

But when pushed, some Republican strategists concede that the drama this go-round has diminished. One called this set of hearings "Scream 2."

Frank Luntz, a GOP pollster and tactician, said: "You can only go to the well so many times."

Pub Date: 5/03/98

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