January 6, 2000 — Democratic presidential candidate Bill Bradley laid out his plans for tax reform on Jan. 4, attacking corporate tax shelters and special interest provisions. Bradley is certainly an expert on the subject; in 1986, he was the driving force behind the biggest tax giveaway to special interests ever.
Bradley, who trumpets himself as “the architect of the 1986 Tax Reform Act,” laid out his agenda for tax reform in the new century. Speaking at the Politics and Eggs Forum in Bedford, N.H., Bradley said, “When a tax break is created to help only a few people, or a company finds a way not to pay taxes, we all end up paying more. If I am president, we will spend money wisely on the things that make the most difference for the greatest number of people, and we will end the influence of special interests in Washington.”
Bradley took particular issue with a provision for Amway Corporation, the marketer of various consumer and household products, that was passed in July 1997, and allows the company to divert its profits to offshore subsidiaries, thus avoiding federal income taxes. “This loophole costs $270 million over 10 years and was termed by The Wall Street Journal a tax benefit designed just for Amway Corp’ (8-11-97),” Bradley’s Web site proclaims.
“Amway and affiliated donors donated over $4 million in soft money to the Republican Party, $1 million of which was in April 1997” – that is, three months before the tax break was passed into law. Bradley implied that the political contributions and the special treatment Amway received were not coincidental.
In attacking narrowly written tax rules for wealthy contributors, Bradley has apparently had a change of heart since his days in the Senate, when he was part of the greatest giveaway to special interests in the history of the Internal Revenue Code. Buried in obscure passages of the Tax Reform Act of 1986, of which Bradley indeed was the architect, were hundreds of special breaks for well-connected individuals and corporations, that cost the Treasury Department billions of dollars, and forced ordinary taxpayers to “end up paying more.”
Consider these passages from the bill, which became part of the Internal Revenue Code thanks to the Tax Reform Act:
Indebtedness outstanding on May 29, 1985. –
Indebtedness is described in this clause if it is indebtedness (which was outstanding on May 29, 1985) of a corporation incorporated on June 13, 1917, which has its principal place of business in Bartlesville, Oklahoma.
Indebtedness outstanding on May 29, 1985. –
Indebtedness is described in this clause if it is indebtedness (which was outstanding on May 29, 1985) of a member of an affiliated group (as defined in section 1504(a)), the common parent of which was incorporated on August 26, 1926, and has its principal place of business in Harrison, New York.
The corporations, not identified by name in the law, were Phillips Petroleum (headquartered in Bartlesville, Okla.), and Texaco. The provisions, designed to allow the two companies better terms for writing off their corporate debt than was available to other taxpayers, saved them $31 million and $85 million, respectively. Like most of the other 650 special breaks in the Tax Reform Act of 1986, called “transition rules” by members of Congress – the identities of the beneficiaries were kept secret. So were the identities of the elected officials who sponsored such breaks.
In 1988, The Philadelphia Inquirer ran a series of articles that exposed some of the outrageous transition rules in the 1986 act. In researching the articles, reporters Donald L. Bartlett and James B. Steele contacted every member of the House Ways and Means Committee and the Senate Finance Committee – of which Bradley was a member – asking for the names of sponsors of particular breaks. Not a single member responded to their questions. Not even Bill Bradley.
At the time the act was passed, in fact, Bradley defended the breaks for special interests, a decidedly different view than the one he expressed as a presidential hopeful in Bedford, N.H. The transition rules, he told States News Service, were “a very small speck on the larger map of what the bill means to the middle income taxpayers and low income taxpayers across this country.” That small speck, according to congressional estimates, amounted to some $10.6 billion in giveaways.
Other recipients of tailor-made tax breaks from Congress included Chrysler Corp. ($78 million), Campbell Soup Co. ($12 million), Aetna ($15 million), General Motors ($70 million), and Atlantic Richfield ($5 million). Colleges and universities, steel companies and convention centers, hotels and cargo ships were among the lucky few that received special rules. Of course, like the breaks for Texaco and Phillips Petroleum, none of the transition rules mentioned by name the beneficiary of the tax break. Consider this passage, supposedly designed to clarify some accounting rules:
Treatment of certain partnerships. In the case of a partnership with a taxable year beginning May 1, 1986, if such partnership realized net capital gain during the period beginning the first day of such taxable year and ending on May 29, 1986, pursuant to an indemnity agreement dated May 6, 1986, then such partnership may elect to treat each asset to which such net capital gain relates as having been distributed to the partners of such partnership in proportion to their distributive share of the capital gain or loss realized by the partnership with respect to each asset.
“Certain partnerships” is a bit of a misnomer. The passage applied to one partnership, The Bear Stearns Companies of New York, and saved the brokerage’s partners some $8 million in taxes. Alan C. Greenberg, the chairman and then-chief executive officer of the firm, was among the beneficiaries of the break. His salary in 1986 was a cool $5.7 million.
Like Amway, Bear Stearns makes hefty contributions to politicians and parties. One of its favorite Washington politicians is none other than Bill Bradley, who’s received more than $70,000 from the firm’s employees. Likewise, the Prudential Insurance Companies of America, Bradley’s eighth most-generous patron, got a $24 million tax break; Merrill Lynch & Company, Inc., number two on Bradley’s list, got a $4 million break.
Bradley’s campaign did not return several calls made by the Center about the 1986 act. Whether, as a senator, Bradley actually authored any of the transition rules that benefited his campaign contributors remains a mystery. In 1996, when the Center prepared the original edition of The Buying of the President, Bradley responded in a letter to a series of questions about his role in crafting the Tax Reform Act of 1986 by saying that it was “one of my proudest achievements in the Senate.”