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Even before Treasury had finished drafting its original plan, the insurers were showing 30-second spots on TV that depicted a bird nibbling away at a | loaf of bread labeled "employee benefits." An actress in the role of frightened housewife exclaimed, "We shouldn't have to pay taxes for protecting our family!" Life insurance agents around the country were revved up by a twelve-minute film entitled The Worst Little Horror Story in Taxes. In the film, Senate Finance Chairman Robert Packwood, a strong advocate of preserving tax breaks for fringe benefits, was shown urging the public to write their Congressmen. The insurers also mounted a direct-mail campaign that inundated Congress last year with 7 million preprinted, postage-paid cards. The campaign was successful: by the time the bill passed the House of Representatives last December, the insurance lobby figured that it had managed to restore about $80 billion of the $100 billion in tax breaks cut out by Treasury I. The insurers hope to win back most of the rest when the bill is reported out by the Senate Finance Committee this spring.
Threats to close a single loophole can bring scores of lobbyists rallying round. The original Treasury proposal sought to eliminate Section 936 of the U.S. Tax Code, which gives tax breaks worth some $600 million to companies that invest in Puerto Rico. Treasury Department officials conceded that the tax break helped create jobs by luring business to the island, but figured that each new job was costing the U.S. Treasury about $22,000. To defend Section 936, a coalition of some 75 U.S. companies with factories on the island formed a million-dollar "Puerto Rico-U.S.A. Foundation" and hired more than a dozen lobbyists, including Deaver. Last fall Section 936 advocates flew some 50 Congressmen and staffers to Puerto Rico on fact-finding trips.
Deaver, meanwhile, coordinated a lobbying campaign aimed at National Security staffers and officials in the State, Commerce and Defense Departments. The strategy was to cast Section 936 as a way to revive the President's moribund Caribbean Basin Initiative and erect a bulwark against Communism in the region. Some two dozen companies with plants in Puerto Rico promised that if Section 936 was retained, they would reinvest their profits in new factories on other Caribbean islands. During a tense moment in the negotiations with the Administration, Deaver even managed to place a ground- to-air call to Air Force One as it flew to the Geneva Summit last November. He wanted to alert Secretary of State George Shultz to stand fast against the maneuverings of the tax reformers at Treasury. Not surprisingly, the Treasury gnomes were overwhelmed. Later that month the Administration committed itself to preserving Section 936.