Texas Rep. Jim Wright and a small group of oil drillers walked into the White House on March 8 for a visit with President Carter.
It was a short but profitable meeting for the oilmen.
They and their colleagues in the independent oil drilling business asked Carter for a $30 million to $50 million tax break, which the President announced Wednesday night in language that meant nothing to the ordinary citizen:
". . . Independent drillers should have the same intangible tax credits as the major corporations," Carter said in outlining his national energy policy to a joint session of Congress.
Translated, the sentence meand the President wants Congress to reverse an action it took last year when it increased the annual taxes on independent oil drillers by $30 million to $50 million in the Tax Reform Act of 1976.
The President talked a great deal about tax reform during his campaign, saying among other things that he was considering eliminating "hundreds of tax breaks."
The particular one Jim Wright and the oil drillers were concerned about - "intangible drilling costs" - is so important to independent oilmen that they lobbied heavily on Capitol Hill last year in an unsuccessful attempt to keep the Tax Reform Act from tampering with it.
Intangible drilling costs over a wide variety of the expenses in drilling an oil well, from labor to some kinds of transportation.
Congressional experts estimate that from 50 to 75 per cent of drilling costs fall into that category. They say the old law, which allowed both independence oil drillers and oil companies to, in effect, deduct such costs directly from their incomes, saved the oil industry an estimated $1 billion a year in taxes.
About 80 per cent of that savings went to corporations, and about 20 per cent to individuals, working alone or in partnerships, the experts said.
Perhaps as many as a quarter of the individuals who took such deductions were looking for tax shelters, the congressional experts estimated.
They were doctors, dentists and others whose main income had nothing to do with looking for oil, but who were willing to finance oil drilling ventures in exchange for the tax savings, and the chance of striking it richer.
Organizations like Ralph Nader's Tax Reform Research Group charged that many independent oilmen paid no taxes on very large incomes because they always had plenty of intangible drilling costs to use as deductions.
So last year Congress put a minimum 15 per cent tax on most intangible drilling costs, raising $30 million to $50 million. The tax applied in effect only to individuals, not corporations.
Almost immediately after the vote, independent oilmen began lobbying to get the change rescinded.
The March 8 meeting with Carter also included White House energy adviser James R. Schlesinger, Wright said, and was requested to ask "in particular" that the tax on intangible costs be removed. "Obviously he hopes that it convinced them," said an aide to Wright.
The drillers Wright took in tow to the President's office included Max Thomas and Jake Hamon of Dallas, Corbin J. Robertson Jr. of Houston, and H. A. True of Casper, Wyo.
They argued, Wrigth said, that it was unfair to put the tax on individuals and not corporations, and that the tax "can result in a very substantial decline in drilling activities."
Sources within the Carter administration say there was some disagreement over whether the President should try to overthrow part of the Tax Reform Act.
A Treasury Department official said Secretary W. Michael Blumenthal spoke to Schlesinger "at the last minute" suggesting his tax policy advisers "had a great problem with it."
Federal Energy Administrator John O'Leary, however, argued that the tax should be climinated. "It's just plain discriminatory," he said. Then he noted later, "My concern with this is not equity . . . It is the delivery of new reserves and new production . . . We have provided a positive disincentive to production . . ."
Stuart Eizenstat, chief of Carter's domestic policy staff, said the matter will be considered again as part of the President's general tax proposals.