Agreement by the president's policymakers and key House supporters on June 12 began a chain reaction that could conclude just before the election with this fateful event: a Jimmy Carter veto of major federal tax reduction in the midst of the tax revolt.
The agreement, reached behind closed doors of Vice President Walter Mondale's ceremonial office just off the Senate floor, was to oppose the tax package sponsored by Rep. James R. Jones (D-Okla.). Since the Jones package may be the very best tax bill President Carter can hope for from Congress, the decision to oppose it suggests a veto ending the long process this fall. That is precisely what the loyalist Democratic congressmen recommended.
This raises a prospect but dimly grasped so far at the White House: Democratic congressmen campaigning under the banner of vetoed tax reduction, with federal income-tax rates scheduled to rise in January. Carter and his party would become counter-revolutionists fighting the tax revolt, bearing the burden of those who resist popular movements.
The president's problems originated in his failure to appreciate that taxpayers are more interested in how much they pay rather than how little their neighbor pays - reduction, not reform. That permitted congressional support to snowball for massive capital-gains tax relief sponsored by Rep. William Steiger (R-Wis.).
When the Steiger amendment deadlocked the House Ways and Means Committee, conservative Democrat Jones unveiled a "middle ground" tax package - considered the handwork of Dr. Charles Walker, former Republican deputy treasury secretary and now a Washington superlobbyist. The Jones package slightly reduces Steiger's capital-gains reductions, cuts both individual and corporate tax rates and throws out nearly all Carter tax reforms.
Would the president accept Jones's bitter medicine to get election-year tax reductions? The administration's lips said, no, no, but its eyes - at least those of some officials - seemed to say yes, yes. In some alarm, liberal Democratic members of the Ways and Means Committee - led by Reps. James Corman of California and Abner Mikva of Illinois - asked for a high-level meeting.
It convened June 12 in the vice president's office, six days after Californians voted themselves huge property-tax relief to open the tax revolt. Besides Mondale and the congressmen, those present included Treasury Secretary W. Michael Blumenthal, presidential economic adviser Charles Schultze and White House aide Stuart Eizenstat.
During the half-hour meeting, the congressmen advised it was too late to compromise tax reforms since the president's reforms were dead anyway. More important, they urged a firm presidential stand against the Jones-package as welfare to the rich. Without dissent, the administration officials agreed.
But more and more Democrats are joining Jones (once a White House aide to Lyndon B. Johnson) in abandoning the president. Rep. Dan Rostenkowski of Illinois, third-ranking Ways and Means Democrat and chief deputy whip of the House, likes the Jones package. Other Democrats are embracing Steiger-style capital-gains tax relief, including Senate notables Frank Church of Idaho and Pat Moynihan of New York. Sen. Sam Nunn of Georgia recently became the first Democrat to sponsor the Kemp-Roth 30 percent income-tax cut, and others will follow.
That means an uphill, apparently hopeless battle in the House against the Jones package. In the Senate, the bill is likely to become even worse for the administration by addition of the Steiger amendment and possibly Kemp-Roth (with a chance that those provisions might be added earlier on the House floor.)
If such a bill is vetoed this fall, taxes would return in January to pre-1976 levels, in effect a $9-billion increase. "Impossible," one administration official told us. "It would hurt like the dickens to sign the Jones bill, but the president would have to do it." However, other administration officials are seriously pushing a veto.
So are such Carter loyalists in Congress as Abner Mikva, an experienced candidate perpetually facing defeat in his Chicago suburban district. He wants Carter to call the vetoed bill a richman's device that discriminates against the middle class and call Congress back into session after the election to pass decent tax relief.
The wily Mikva is plotting a substitute on the House floor throwing all the revenue lost by the Jones tax reduction into relief for the $15,000-to-$50,000 brackets. While unlikely to pass, it would provide a campaign talking point for him and other loyalist Democrats.
Republicans are more than willing to accept Mikva's challenge. They would hoist high the vetoed tax bill, campaigning as warriors in the tax revolt fighting the counterrevolutionary Carter. While he can yet shed that label, the June 12 meeting was a long step toward stamping it on the president.