A WAshington consulting firm, featuring two former aides to Sen. Abraham A. Ribicoff (D-Conn.), has been circulating a memo offering its assistance - for a $200,000 retainer - to a number of corporations in connection with a tax relief measure the senator is sponsoring.
The firm, Malmgren Inc. describes itself as "in an unusually good position to influence the outcome of the debate" on the issue - the taxation of Americans abroad - "and move it in a good direction."
The five-page memo, a copy of which was obtained by Tax Analysts and Advocates, points out that two top staffers, Harald B. Malmgren (the firm's president) and Jeffrey Salzman, used to work for Ribicoff.
The senator says he is "shocked."
Salzman in particular, is described as having tried [WORD ILLEGIBLE] "a good settlement favorable to companies operating overseas" while he was on Ribicoff's staff.
"It is well known," the memo continues, "that the likely pattern of compromise, or the best basis for a new solution, is the proposal introduced by Senator Ribicoff, and Salzman has been the principle (sic) drafter of all variations of that approach. (He was, of course, formerly Legislative Assistant to the Senator)."
The circular also advertises the credentials of Malmgren, a former staffer for Ribicoff and the Senate Finance Committee who is said to be "well known" there and at the House ways and Means Committee as well as "the Treasury, the White House and other agencies."
Finally, the memo says James Hogue, who was deputy assistant secretary of the Treasury for congressional relations in the Ford administration, would be available to assist in organizing support. "His access to key members of the House and Senate on the Republican side is excellent," the memo declares.
Multinational companies have been trying for months to reverse provisions of the 1976 Tax Reform Act that substantially reduce the exclusions from federal income taxes enjoyed by Americans working overseas.
Under the old law they were allowed to exclude $20,000 a year and, in addition, to take a credit for foreign taxes paid. The Tax Reform Act reduced the exclusion to $15,000 and prescribed other changes that would, according to a recent Treasury Department estimate, extract from American taxpayers overseas $310 million more than they have been paying.
These new rules, however, have yet to go into effect, because a Ribicoff-sponsored rider on the Tax Reduction and Simplication Act of 1977 postponed higher rates for the 1976 tax year.
Last fall the House approved another one-year delay, but the Senate has yet to act. As a result, approximately 150,000 Americans working overseas will have to pay stiffer taxes on their 1977 incomes unless a relief measure is enacted shortly. Their returns are due June 15.
The Malmgren Inc. memo, undated but evidently written within the last two months, noted that time was running out, but suggested that the "circumstances are ripe for separate and rapid consideration" of a bill that would both provide another one-year postponement and make longer-term changes to satisfy "a number of companies that want less uncertainty and more liberal treatment in this area."
A senior member of the Senate Finance Committee, Ribicoff introduced his bill last September while Salzman was his legislative aide. It would provide what Ribicoff has called a "permanent solution," eliminating any automatic exclusion of income and providing instead for deductions to cover higer costs of living, schooling and housing abroad.
Advertising "the most effective team available to work on international taxation questions, given the special background and reputation of the people involved," Malmgren Inc. proposed to sell its services to a small group of up to 10 companies for $200,000:
"We feel that the group should not be large because it would be very awkward to negotiate effectively and quickly for a wide and diverse range of interests."
Big oil and construction companies in the Middle East, for instance, would be more interested in generous housing allowances than would corporations with subsidiaries in Europe. One company operating in Saudi Arabia reportedly gives workers a base salary of $21,000 another of $30,000 a year for housing alone.
Thus, during his visit to Saudi Arabia last winter, Treasury Secretary W. Michael Blumenthal was presented with a petition against looming U.S. taxes by Aramco employes at Dharan. Aramco, which is made up of Exxon, Mobil, Texaco and Standard Oil of California, has the world's largest oil producing operation in the rich Saudi fields.
It could not be learned whether Malmgren Inc. picked up any clients with its memo. Neither Malmgren nor Salzman could be reached for comment despite repeated attempts. Hogue told The Washington Post last night that he has been laid up until recently with intestinal flu and had had "just a very brief glance" at the memo.
"I really can't comment on it," he said.
Ribicoff responded with this statement, reported in Tax Notes, the weekly journal of Tax Analysts and Advocates, the investigative group that uncovered the memo:
"I am shocked. Both Mr. Malmgren and Mr. Salzman were members of my staff. Period. Mr. Malmgren left my staff on June 2, 1976. Mr. Salzman left my staff on Nov. 30, 1977. They have absolutely no special relationship with me and are completely out of line to make such a representation."
The statement was reiterated by aides to Ribicoff.
Asked whether the senator had been contacted by Salzman or anyone else from Malmgren Inc. about the foreign source income issue, administrative assistant Malcolm O. Campbell Jr. said: "In terms of lobbying on the bill, lobbying for changes or anything of that nature, no."
Campbell added, however, that "we have been contacted by Jeff - more often than not we have contacted him - just in the following up things he worked on while he was here," including "this item."
The Senate Finance Committee recently approved a bill calling for a two-year delay in any new taxes and implementing Ribicoff's approach for income earned in 1979 and thereafter.
Observed Tax Notes: "Former government aides and members of Congress are frequently hired as lobbyists because of their knowledge of the issues they worked on while they were in government. But more importantly, they are hired because of policymakers they worked with or knew."
Rarely, however, are the affiliations advertised so bluntly. It was a "dumb" move, a source close to Ribicoff declared. "If they had any access to the senator, they've lost it."