If James A. Baker III of Houston and the U.S. Treasury Department were a Broadway show, it would be an absolute smash. Just look at the almost unanimously uncritical reviews of Jim Baker as "the behind-the-scenes architect of many of President Reagan's legislative victories." Most also mentioned Baker's "superb instincts," "intelligence," "integrity," and "judgment."
But what seems to have distinguished Jim Baker most in the authentically conservative Reagan administration is that, according to press reports, he is "tough," "practical," and "reasonable." To believe the Texan's more committed Washington admirers, a lot of whom are non-admirers of the president he has so loyally served, is to be persuaded that, on a daily basis as White House chief of staff, Baker saved Ronald Reagan and the American people from the former's worst impulses.
But this week Treasury Secretary Jim Baker officially sheds the role of supporing actor and steps from behind the scenes to become the administration's Leading Man as the principal architect and advocate of the Reagan tax plan to bring simplicity and fairness to a set of laws lacking in both.
Baker's early reviews in the new role have been, at best, mixed. He has been busy rewriting a plan authored some six months ago by his predecessor as Treasury secretary, Donald T. Regan. The Regan plan was truly revolutionary in that it boldly and frontally attacked corporate tax breaks, restored a much-needed sense of fairness to the system, and reestablished the Treasury Department as the chief defender of the nation's revenue base.
To his credit, Don Regan wrote a bill that could rewrite the nation's political future by liberating the Republican Party from its velvet bondage to corporate board roomsand by proving to working-class Americans that, in order to reduce tax rates for middle-class Americans, this Republican administration would actually eliminate dozens of preferences in the tax code, beloved by the wealthy they benefit.
The easy part of this whole process is cutting the rates. The pruning of the tax preferences, which in 1967 were worth a piddling $37 billion and which today cost all of us some $400 billion in uncollected taxes, can be painful for the political leader who tries. The Regan plan, which ducked none of the painful pruning and won endorsements from such unlikely sources as Common Cause and Arizona's Democratic governor, Bruce Babbitt, failed to win the one endorsement that counted -- that of Ronald Reagan, who was publicly startled when told that corporations would pay more in taxes under the Regan plan. It ought to surprise nobody now that the word around Washington is that the Jim Baker plan is long on easy trimming and short on painful pruning.
The threshold issue in our legislative politics is Who Gets What and Who Pays For It. In legislative tax politics -- where much of the Who Pays part is determined -- the threshold issue in how serious any administration or Congress is about tax fairness is oil.
The support for tax preferences for oil has always been much stronger in Washington than in the rest of the United States. Sam Rayburn, Texan and speaker of the House, understood that the oil depletion allowance could only be preserved behind closed committee doors: "Do you think you could convince a Detroit factory worker that the depletion allowance is a good thing? Once it got on the floor, it would be cut to ribbons."
For Jim Baker of Houston, fairly or unfairly, oil is even more of a threshold question. Under the Regan plan, the two most notorious preferences of the oil industry -- the depletion allowance and intangible drilling costs -- were to be repealed. But it now looks like treasury intends to follow the lead of Rep. Jack Kemp (R-N.Y.) and Sen. Bob Kasten (R-Wis.) who recently amended their tax simplification bill to restore these preferences for the oil industry, a move Kemp justifies by seeking to elevate a tax loophole to a question of national security: "I don't want to depend upon unreliable Arab sources."
Popular support for any tax reform bill eventually depends upon the perception of fairness. That public perception begins with oil.
The irony in this Washington drama is that Donald Regan, who has been criticized for lacking a political touch, produced a visionary blueprint with the potential for making Republicans the nation's majority party. Now Jim Baker, the respected political hand, runs the risk of pushing a plan that is neither simple nor fair and that could squander the chance of party realignment.