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Donors to Campaigns Fared Well in Budget

Contributions and Tax Breaks
A new report by Citizen Action links campaign contributions to tax breaks in the recently enacted tax and budget deal.
Tobacco companies:
Proceeds from a 15 cent-per-pack cigarette tax increase would offset future costs of a national settlement of tobacco lawsuits.
Estimated benefit: $50 billion
Contribution*: $11.3 million

Provision makes it easier for HMOs to tap into Medicare and Medicaid markets.
Estimated benefit: Not available
Contribution*: $8.9 million

Health insurance firms:
Will be allowed to sell medical savings accounts to Medicare recipients, giving them a slice of the Medicare market.
Estimated benefit: $4 billion
Contribution*: $3 million

Oil, energy and natural resource firms:
Alternative minimum tax (AMT) provision will exempt altogether companies with assets less than $5 million, and let larger companies pay at least 75 percent less AMT than they pay now.
Estimated benefit: $18 billion
Contribution*: $18.3 million

Big airlines:
Air ticket taxes will be reduced from 10 percent to 7.5 percent per ticket. Also new $3 tax applied to each flight segment favors larger carriers by making smaller, multiple-stop airlines more expensive for consumers.
Estimated benefit: Not available
Contribution*: $3.2 million

Software companies:
Tax exemption was enacted on all income earned from licensing, production and distribution of software overseas.
Estimated benefit: $1.7 billion
Contribution*: $1.3 million

* Donations to all political parties and congressional candidates. The total for contributions exceeds $35 million because a few companies appear in more than one category.
By Ceci Connolly
Washington Post Staff Writer
Friday, August 22, 1997; Page A21

Political parties and congressional candidates have received $35 million since 1995 from six industries that fared particularly well in the recently enacted budget and tax deal, according to a report released yesterday by Citizen Action.

In its report, "Tilting the Balanced Budget," the consumer group concludes that special interests such as the tobacco and insurance lobbies continue to use campaign contributions to win favorable treatment in Congress – even as other Americans feel the budget pinch from Washington.

"Members of Congress like to look the other way when it comes to providing special favors, tax breaks and other legislative goodies to some of their biggest domestic contributors," said Mike Gehrke, Citizen Action's research director.

Specifically, the report tracks six key provisions in the recent budget deal and corresponding political contributions by the industries likely to benefit. In every category except the airline industry, Republicans received a larger share of the donations than Democrats. As is often the case, congressional leaders in both parties were the primary beneficiaries.

At the top of the list is the tobacco industry. The group calculated that tobacco companies gave $11.3 million in the past 30 months; the companies also received a promise that they may use a new 15 cent-a-pack tax increase as a credit against the proposed national tobacco settlement. That would amount to a $50 billion tax break.

Philip Morris was the largest single contributor identified in the report, giving almost $4.6 million, most of it to the Republican Party and GOP candidates. Second on the list of donors was R. J. Reynolds, which gave $2.7 million.

Officials at the Tobacco Institute, the industry's Washington lobbying arm, were not available for comment.

The other businesses identified in the report are: health maintenance organizations, which will be able to recruit millions more Medicare patients; insurance companies, which can now market high-deductible plans to Medicare clients with medical savings accounts; large airlines, whose passengers will pay a 7.5 percent ticket tax instead of the previous 10 percent tax; software manufacturers, which will receive a tax exemption on overseas distribution; and energy firms, for which the alternative minimum tax will be reduced by at least 75 percent.

At a time when Congress was increasing premiums for Medicare recipients, lawmakers also approved two changes that will make it easier for HMOs and insurance companies to tap into the lucrative senior citizen market. According to the report, the health and insurance industries contributed nearly $12 million to political parties and congressional candidates.

Some industry representatives and congressional staff members denigrated Citizen Action as a group that is overly reliant on money from trial lawyers, a powerful constituency with its own legislative agenda.

"I don't know that Citizen Action can speak as a lone voice for consumers," said Richard Coorsh, a spokesman for the Health Insurance Association of America, a trade group.

"This is not quid pro quo money," said Fred Wertheimer, who runs Democracy 21, a group promoting campaign finance reform. "This is investment money where the interest groups put up large sums of money and then come back down the road seeking favors."

Virtually every industry identified in the report has a long history of political giving, he said, and it is average Americans who pay the price.

"To the extent a particular interest gets a special tax break because of political money, every other taxpayer in the country winds up paying for it," said Wertheimer, former president of the citizen lobby group Common Cause.

But some analysts said it is difficult to say whether the industries cited out in the report actually fared well in the budget deal.

Robert D. Reischauer, a budget expert at the Brookings Institution, said the airline industry still faces a hefty tax and tobacco firms may end up paying $365 billion in the nationwide settlement.

"Maybe it's an accepted fact that those who give get heard," he said. "But being heard and being accommodated are two very different things."

© Copyright 1997 The Washington Post Company

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