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Tax reform is about to be trashed

The cafeterias of tax breaks being offered by President Bush and by the Democrats in Congress seem to have one unhappy thing in common.

Each side, without ever saying so, is proposing repeal of the spirit of the Tax Reform Act of 1986. If this is what the nation and its leaders want to do, that's fine. But virtually all the principals in this latest tax dance _ including Bush and House Ways and Means Chairman Dan Rostenkowski, D-Ill. _ signed on to the 1986 Act. And if they are going to junk it, let them not do so casually or without embarrassment. Because the accomplishment of historic tax reform against all political odds in 1986 was the occasion of a virtual orgy of self congratulation when Congress and President Reagan finally agreed to it.

I was there the day it passed the Senate and heard it called _ I believe by Sen. Daniel Patrick Moynihan, D-N.Y. _ "one of the greatest events in the history of taxation." The idea was that all the special interest provisions that had been tacked onto the tax code over the years _ actually only a huge part of them _ were being banished forever so that everybody's rates _ rich and poor _ could be lowered.

The tax code would be made simpler and more evenhanded. Evasion would be more difficult and less rewarding. And American business could go back to the business of making products and money instead of basing decisions on how the tax code could be made to play Dixie.

This grand and bipartisan pact of fairness and rationality, everyone understood back then, would hold only so long as individual special interests _ the real estate industry, the insurance industry, the banks, the oilbarons, the capital gains maniacs _ were not allowed in subsequent years to start sneaking their special tax breaks, however laudable or socially useful their goal, back into the system. After that, everyone knew, would come the deluge.

Well, it has started. President Bush, of course, wants capital gains preference back in the code. He also wants a nice, narrow little tax break for first-time home buyers. And he wants to sneak certain interest rate deductions back into the system and some real estate tax shelters.

The Democrats are not to be outdone. Their package makes a greater attempt at fairness, but it also does a degree of violence to the concept of tax reform.

Every lobbyist and trade representative in Washington understands that the hog trough is being reopened, that it is time to get the PAC money flowing toward candidates likely to be sympathetic to the plight of interests, sectors and industries, even individual companies, that in these troubled times can all make wonderful cases for a new tax break or loophole.

It is only a matter of time before some group comes up with a study showing that restoring the deductibility of the three-martini business lunch _ remember it? _ will create a million high-paying jobs in the distillery sector.

And once the president gets capital gains preference back in the code, just wait until you see the wish list of his friends in the oil industry. In a few years the rate structure for everybody will be back where it was before 1986.