Even before its delayed arrival on Capitol Hill, President Carter's sweeping tax reform is viewed there by both friends and enemies as an assault on the middle class - a perception with ominous overtones for the Carter administration and the economy.
The President would be hard put today to find 10 votes for his tax package on the 37-member House Ways and Means Committee. Rep. Abner Mikva (D-Ill), a key administration supporter on the committee, has warned the White House he cannot support what is being drafted. If loyalists such as Mikva are bailing out, what can be expected from the likes of Sen. Russell Long (D-La.), the independent-minded chairman of the Senate Finance Committee?
The reply from the White House is that the bitter reforms will be sweetened by such generous tax cuts that opposition will fade. As of now, however, the President is threatened with demoralizing legislative defeat next year and a jolt to economic confidence now.
Delay in getting the program to Congress is partly because by trying to meet these objections (though the White House also wants to get the energy taxes through Congress before sending up the reforms). Now wading through over 200 pges of reading material, Carter informed his aides he would make no key decisions before the weekend of Oct. 8.
Those decisions may well soften the program's effect on taxpayers in the $20,000 to $100,000 brackets. Nevertheless, revenue-producing reforms will cut most heavily not into the rich but into these upper-middle-income taxpayers - numerically small but economically and politically vital.
What's more middle-class sensitivity is heightened by the Carter-backed Social Security bill nearing House passage. To ensure the fiscal integrity of the Social Security system, the bill would sharply increase payroll taxes on persons earning over $16,000 a year. Democratic congressmen consider this a necessary evil but do not want to compound the injury through tax reforms.
This attitude is typified by Mikva. As chairman of the liberal Democratic Study Group, he might be expected to be an ardent tax-reformer. But any such ardor is cooled not only by his upper-middle-income constituency in Chicago's north suburbs, but also by practical experience as a congressional tax-writer.
Mikva has come to learn hard lessons that were foreign to Jimmy Carter as a presidential campaigner: Tax reform cannot be a vehicle for helping the poor, who do not pay taxes anyway; the tax structure is not a suitable arena for class warfare; the Internal Revenue Code is not a disgrace to the human race" (candidate Carter's description) but grossly overcomplicated and confusing.
So. Mikva has been trying to persuade the administration to lower its sights on tax reform. He has accomplished nothing with Carter's tax-reform drafters: White house chief domestic policy aide Stuart Eizenstat and Assistant Treasury Secretary Laurence Woodworth. But he still hopes Carter will soften the program's effect on middle-class taxpayers before it reaches Congress.
No matter how litle or much the President softens the bite, revenue-producing reforms will still be aimed at the $25,000-plus business executive and self-employed entrepreneur. They, not coupon-clipping millionaires, will be affected by limitations on expense-amount lunches, home-mortgage deductions and - by far the most important - the treatment of capital gains as ordinary income.
Consequently, Republicans on the Ways and Means Committee view the combined Social Security - tax-reform assault on the middle class as a political windfall. "I guess Carter meant what he said during the campaign about raising taxes for everybody making over $17,500," Rep. Barber Conable of New York, the committee's senior Republican, told us. Eizenstat calls this nonsense, contending that proposed tax cuts are so substantial that practically anyboby making under $100,000 a year will pay less taxes.
Nevertheless, the perception of the program, fairly or not, as anti-middle class will further undercut consumer and investor confidence. That view is enhanced by such forecasts as the Sept. 28 newsletter of economist Eliot Janeway: "The package about to be unveiled though advertised as aimed against 'the big boys,' will deal the little people a body blow." That is what Mikva, without success, has tried to warn the President and his men against.