A Flock of Fine-Tuned Favors

Even by Senate standards, the provision was a triumph of devious verbosity. It granted a special tax break on corporate debts "if such indebtedness was originally incurred before May 30, 1985, by a domestic corporation which was incorporated on March 18, 1983, in Delaware, and which indebtedness was subsequently transferred to a domestic affiliate which was incorporated on October 17, 1890, and whose principal place of business is in California . . ." and so on and on through 131 words. The purposes of this lush verbiage: 1) to make certain that the favor would go to just one company, Unocal, an oil giant that figured to escape $50 million in taxes by getting credits for interest payments on the $4.4 billion debt it piled up last year fighting off a takeover attempt; 2) to hide that fact behind a nearly impenetrable screen of words.

The maneuver failed: the full Senate two weeks ago knocked the benefit for Unocal out of the mammoth tax bill prepared by the Senate Finance Committee. But the Unocal provision was one of only a handful of such goodies that bit the dust. Some 170 others were in the 1,489-page bill, and late last week Senators struggled to add more breaks for specific constituents by floor vote.

The debate over special favors got caught up in a larger squabble that kept the Senate from passing the tax bill last week. When floor action began, Finance Committee Chairman Bob Packwood, the bill's manager, tried to enforce a no-amendments stand in order to preserve the delicate balance of the measure, which lowers and simplifies tax rates in return for wholesale elimination of exemptions and deductions. But fellow Senators, their tempers frayed by two late-night sessions, offered 62 amendments, mostly general but minor. A few, however, were phrased in the confusing Unocal style to offer favors to specific companies, industries or projects (Walt Disney Productions, the makers of cellular telephones and the Houston Astrodome, to cite three examples from the Finance Committee bill). Finally, with lawmakers lining up to introduce 60-odd additional amendments, the Senate put off a final vote on the whole bill until Tuesday.

Special benefits have been a feature of tax law for generations. They were long known as Louis B. Mayer rules because one of the first applied only to that Hollywood mogul. Nowadays they go by the name of transition rules, because they mainly keep open for a while, and for specific companies, tax loopholes that Congress is closing for everybody else. Collectively, the transition rules proposed by the Finance Committee would cost the Federal Government $5.5 billion in lost taxes, a relative pittance compared with the $25 billion of special favors in the bill passed by the House last year.