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The fabled three-martini lunch, threatened by the Treasury Department's proposal to end tax deductions for business entertainment, was preserved as at least a two-martini lunch after heavy lobbying by the hotel and restaurant industry. In the House-passed bill, 80% of the cost of a business lunch can still be deducted. The oil-and-gas lobby managed to restore over half the tax breaks for well drilling removed by the original Treasury bill. Lawyers, doctors and accountants won an exemption from more stringent new accounting rules. The lobbying by lawyers was a bit crude: Congressmen received letters that were supposedly written by partners of different law firms but were all signed by the same hand. No matter. Though congressional etiquette demands that each constituent's letter be answered personally, "We just let our word processors talk to their word processors," shrugged a congressional staffer.
The real deal making was done over so-called transition rules, which postpone or eliminate new taxes for certain individual businesses. The House- passed bill is studded with some 200 transition rules, which have been written to protect pet projects in a Congressman's district or large industries with particular clout on the Hill. Drafted behind closed doors, these rules are written in language designed to make it difficult to identify the real beneficiaries. One transition rule, for instance, waives the cutbacks on investment tax credits and depreciation for the fiber-optic networks of telecommunications companies that have committed a certain number of dollars for construction by a certain date. It turns out that just two companies profit from the exemption: AT&T and United Telecom.
Not every lobbyist made out in the wheeling and dealing, by any means. Some were a little too greedy. The banking lobby pushed an amendment that would actually increase its tax breaks for bad-debt reserves. The lobbyists figured that they were just making an opening bid; their real aim was to protect existing tax breaks. To their surprise, however, the amendment passed in the confusion of an early Ways and Means Committee drafting session.
When jubilant banking lobbyists began shouting "We won! We won!" outside the hearing room, some Congressmen became angry. Giving more tax breaks to the already well-sheltered banking industry was no way to sell voters on tax reform. The amendment was repealed.
Despite the predations of lobbyists, a tax-reform bill may be signed into law this year. But it must first survive the Senate, and already the advocates are queuing up to be heard. "I wish there were a secret elevator into the committee room," laments Senator David Pryor of Arkansas, a member of the Finance Committee. "Whenever I go there to vote, I try to walk fast and be reading something."