Angry because the administration refused to take a stand, the chairman of the House Ways and Means Committee abruptly canceled a hearing yesterday on controversial legislation putting new limits on the money that can be set aside tax free in pension plans.
Rep. Dan Rostenkowski (D-Ill.) charged that the Treasury had declined to testify because of pressure from major Republican campaign contributors. Half an hour after the session was supposed to start, he took the chair and told a stunned audience of at least 400 lobbyists and other interested parties that overflowed the committee room:
"Apparently this administration and those on the outside who support this administration have difficulty testifying in favor of legislation that would limit tax deferred pensions to $90,000 a year.
"As one Office of Management and Budget source has told us, the Republican contributors of $10,000 or more, the so-called Eagles, oppose the administration coming to the Hill to support legislation that would put such restraints on a very, very generous tax-supported private pension system which now has tax expenditures . . . equal to $26 billion a year."
Rostenkowsi rescheduled the hearing for tomorrow morning "at which time," he said, "we expect to hear from the administration."
Treasury officials instantly denied they were pressured by campaign contributors.
They said John E. Chapoton, assistant secretary for tax policy, had been pulled as a witness because Secretary Donald T. Regan had been in Europe and wanted to review what has become one of the most controversial tax bills before Congress. Chapoton's testimony had been expected to support the goals of the legislation.
"We have not changed our position," Marlin Fitzwater, a spokesman, said. "The secretary is reviewing it."
Another Treasury official said "given the flap this bill is creating it makes sense for the secretary to review it. That doesn't mean the Eagles are flying."
The legislation provoking the furor would reduce significantly the maximum amount of income top executives and high-earning professionals who form corporations can put in pension funds and avoid taxation until benefits are paid out after retirement.
The measure, sponsored by Rep. Charles B. Rangel (D-N.Y.), would lower the maximum amount of annual income on which tax can be deferred from $45,475 to $30,000 under one type of plan, and reduce the maximum retirement benefit under another kind of corporate plan from $136,425 to $90,000.
Using a combination of the two, a participant in a corporate plan can now shelter over $150,000 a year from federal tax.
The tax advantages in these corporate pension plans are the major reason behind the current wave of incorporations by doctors, lawyers, professional athletes and others. The Rangel bill has produced a groundswell of opposition from professional people and a host of organizations including the Chamber of Commerce, the National Association of Manufacturers, the American Bankers Association, the International Association for Financial Planning, the American Society of Pension Actuaries and the American Council of Life Insurance.
"I no longer read my mail," Rangel said. "I weigh it."
With an almost unanimous voice, these organizations do not attempt to defend the major tax benefits available to the wealthy, but argue that restricting the tax breaks in pension plans for the major beneficiaries will prompt many firms to abandon corporate pension plans. In addition, they contend that the corporations retaining plans will reduce benefits for lower-level employes in direct proportion to the percentage lost by top executives.
Sen. Robert J. Dole (R-Kan.), chairman of the Finance Committee, has indicated that he intends to propose legislation restricting pensions as part of a revenue-raising package.