Rep. Norman E. D'Amours (D-N.H.), who is spearheading the House effort to repeal a new law requiring withholding of income received on interest and dividends, said a public interest lobby raised a "red herring" when it reported that a number of opponents of the law received campaign contributions from the banking lobby.
D'Amours said that records show the biggest supporters of withholding on dividend and interest income also were major recipients of contributions from the American Bankers Association, the U.S. League of Savings Institutions and the Credit Union National Association.
These three Washington trade groups have launched a massive--and apparently successful--campaign to persuade savers to write their legislators urging repeal of the law, which is to take effect July 1. Millions of pieces of mail, most of it supporting repeal, have crossed legislators' desks in recent weeks.
D'Amours said that if the public interest lobby Congress Watch had included data on financial industry contributions to supporters of withholding, its study would have shown there is virtually no relationship "between a representative's or senator's position on interest and dividend withholding and support from banking groups."
Sen. Robert Dole (R-Kan.), chairman of the Senate Finance Committee, has accused the bankers of misleading the public in their campaign and has threatened the industry with tax reprisals if the withholding law is repealed. Dole, in his 1980 reelection campaign, received a total of $9,000 from the three groups plus another $2,000 from the Kansas Bankers Association.
Rep. Dan Rostenkowski (D-Ill.), chairman of the House Ways and Means Committee and a supporter of withholding, received $11,000 from the three groups. D'Amours received $11,750.
The withholding law was passed to catch cheaters who do not report their dividend income on their tax returns. Dole has estimated withholding will generate $20 billion in revenues that otherwise would be lost between 1983 and 1988.
The bankers, in their campaign, have said that government was "looting" savers' funds. The law imposes no new taxes on interest or dividend income, but does require institutions to withhold 10 percent of that income in much the same way employers are required to withhold income taxes.