An administration-backed effort to end an exotic tax break for about 2,500 commodity traders in this year's tax bill was overturned in the House Ways and Means Committee after the traders conveyed promises of political contributions, according to several sources on Capitol Hill.
According to these sources, who asked not to be identified, the Chicago Board of Trade and the Chicago Mercantile Exchange, the two largest commodities exchanges, led a high-powered lobbying effort whose principal targets were Democratic members of the Ways and Means Committee. The effort succeeded.
If enacted into law, the Ways and Means provision will continue a tax break worth about $400 million to approximately 2,500 commodity traders. This works out to an average of $160,000 each. The bill would eliminate the loophole for people other than professional commidity traders, a move that would save the Treasury $900 million, according to its estimates.
The word that campaign contributions might be available if the vote went the right way was reportedly passed by Rep. Tony Coelho (D-Calif.), chairman of the House Democratic Campaign Committee. Two well-placed sources said Coelho had made this known to key Deocratic members, and one member confirmed that yesterday.
Coelho said he was a strong supporter of maintaining the tax provision favorable to commodity traders on the grounds that it helped farmers, and he represents a largely agricultural district. Agriculatural products are actively traded.
John C. White, former chairman of the Democratic National Committee and a member of the board of the Mercantile Exchange, was said by one well-placed source to have suggested the idea of campaign contributions. Reached yesterday, White said, "I played no political role in it whatsoever."