WASHINGTON -- In an election-year move Republican leaders had hoped would send a powerful political message, the House voted yesterday to abolish the much-hated federal income tax code -- but by a margin so thin the bill's future is bleak.
Responding to a grass-roots campaign by small businesses, House GOP leaders turned a bumper-sticker crusade launched last fall into a piece of legislation that would wipe off the books by 2003 a 5.5 million-word tax code widely acknowledged to be painfully complex.
The bill calls for a new, simpler, but unspecified tax system to be adopted first, but supporters contend that politicians will get serious about sweeping tax reform only if Congress establishes a firm deadline to enact it.
"We're not listening to the Washington lobbyists. We're not listening to the liberal establishment. We're not listening to the folks at the Treasury Department who love the current tax code," declared House Speaker Newt Gingrich, a Georgia Republican, standing on a flatbed truck flanked by a petition bearing 750,000 signatures and calling for an end to the tax code.
Even so, a measure once deemed by Republican leaders as their signature cause of 1998 barely passed -- 219-209 -- after the White House joined with big business, labor and corporate accountants to denounce the bill as reckless and irresponsible.
"With all this other economic uncertainty around the world, everyone is looking to us as a stable, rock-solid, forward-moving country, trying to give stability to other countries," President Clinton said yesterday. "The last thing in the world we need to do right now is to send some signal of instability that we've decided to get rid of our whole tax code without knowing what to replace it with."
Yesterday's surprisingly narrow margin of passage makes it doubtful that the bill could pass the Senate. The House likely would not be able to muster the two-thirds majority necessary to override a certain presidential veto.
Representatives from Maryland voted largely along party lines, with Republicans Roscoe G. Bartlett, Robert L. Ehrlich Jr. and Wayne T. Gilchrest in favor of the bill, and Republican Constance A. Morella joining Democrats Benjamin L. Cardin, Elijah E. Cummings, Steny H. Hoyer and Albert R. Wynn to oppose it.
Supporters of the bill said they are impatient with political rhetoric about fairer and simpler tax systems when nothing is being done to achieve it. Congress has plenty of time to forge a new tax code over the next four years, they said, but will do so only under great pressure.
'Quit talking, start doing'
"It forces Congress to quit talking about comprehensive tax reform and start doing something about it," said Rep. Steve Largent, an Oklahoma Republican who is the bill's main sponsor.
Opponents warned that voting to eliminate the tax system without specifically approving a new one would create havoc in the economy.
They predicted that businesses would shy away from expensive equipment purchases because they would not know what tax treatment those investments would receive. Potential homebuyers would be reluctant to take the plunge because they could not count on being able to deduct the mortgage interest, they said.
"A genuinely terrible idea," said Robert E. Rubin, the usually cautious treasury secretary.
Republicans are pledging to scrap the tax code and replace it with a simpler system at the same time that they are calling for new tax breaks and credits -- such as expansion of tax-preferred education savings accounts and tax deductions for middle-income married couples -- that would make the tax code even more complex.
Those changes would come on top of the 1997 tax law that created 285 new sections in the tax code and 824 amendments. Despite the GOP's calls for a single, flat income tax rate, the 1997 law created 11 marginal tax rate categories that rise and fall like the New York skyline, said American Enterprise Institute researchers Diane Furchtgott-Roth and Kevin Hassett.
Even so, Republican leaders had hoped their drive to scrap the behemoth tax code would prove so politically attractive that not even the Democrats could resist jumping on board.
When the National Federation of Independent Business -- leading voice for the nation's small businesses -- launched its "Scrap the Code" petition drive last fall, Gingrich and Senate Majority Leader Trent Lott were the first to sign on.
But the tide began to shift after the National Association of Manufacturers denounced the bill and the U.S. Chamber of Commerce -- another chief lobby for big business -- expressed strong misgivings.
Pub Date: 6/18/98