Rep. Don J. Pease (D-Ohio) is hardly a House-hold name. A 14-year veteran lawmaker, he is a low-key, self-effacing Democratic foot soldier more concerned with good policy than self-promotion.
This week, however, a plan for trimming tax deductions has taken on his name and could become the last component to fall into place on the tax package that has tied up budget negotiations for nearly nine months, and the little-known legislator's name is on every lawmaker's lips.
In fact, his name (pronounced PEEZ) has been turned into a noun, as in "accepting or doing Pease;" an adjective, as in "Pease plan;" and a verb, as in "a-Peasing the administration."
"You have vaulted from the back benches to the forefront in a way I have never seen in 20 years here," Rep. Romano L. Mazzoli (D-Ky.) said to Pease outside the chamber yesterday. "You have got the attention of a lot of people, not only around here but around the country."
Other lawmakers have begun joking that the House should "give Pease a chance" and called for "Pease in our time." An Ohio newspaper carried an article with a headline that read: "The A-Pease Plan."
In some ways, that is exactly what the Ohio lawmaker's plan does. In its latest form, it effectively raises the marginal income tax rate by 0.93 percentage points for people with incomes of more than $100,000.
But the Pease plan, by arbitrarily reducing deductions taken by wealthy taxpayers, disguises the rate increase enough that President Bush might believe he can sign a deficit-reduction package and still boast that he held income tax rates down.
Pease said he would prefer a simple increase in the highest income tax rate, but he has been touting his plan to budget negotiators because of Bush's opposition to a tax increase.
"I saw it as the logical compromise between a president who might not want any tax-rate change and a Democratic Congress who wanted to make sure that the wealthy wanted to pay their commensurate share of the tax burden," Pease said yesterday.
Although the Pease plan seems to have made a tax compromise possible, enthusiasm for it is lukewarm. On its face, it represents a step backward in the campaign to make the tax code simpler and easier to understand. In addition, lawmakers from high-tax states and municipalities such as New York, California and New Jersey have been particularly critical because they fear it will be the first step toward a more general attack on the deductibility of state and local taxes.
New York Gov. Mario Cuomo (D) said yesterday that by disallowing a portion of a person's deductions the government was violating the principle against double taxation.
"And it's all a ruse to avoid doing the obvious thing: raise the rates," he said.
Even some Republicans remained baffled about why the Pease plan would be more palatable to Bush. Though more difficult for most people to understand, "the wealthy who are being taxed will realize it," said Rep. Christopher Shays (R-Conn.) "Why try to hide it? It's very difficult for us to understand the position of the administration."
To figure out how the Pease plan would affect any individual taxpayer, take 3 percent of gross income above $100,000, then subtract that amount from the total amount of itemized deductions.
If a person had income of $150,000, for example, and claimed $40,000 worth of deductions, the plan would disallow $1,500 worth of deductions (3 percent of $50,000).
At the new top tax rate of 31 percent, that would cost such a taxpayer an additional $465 in federal taxes, raising the effective tax rate to as much as 31.93 percent for the wealthiest Americans.
One virtue of the Pease plan is that it shaves the impact of deductions without putting a ceiling on them. In that way, it may discourage a taxpayer from taking the first deduction, but not the last one. That was important to charitable organizations and the construction industry, which argued that a ceiling would discourage tax-free contributions and second-home purchases that were based on deductible spending above the ceiling.
The Pease deduction reduction applies only to roughly 4.3 million individuals and couples who file tax returns with more than $100,000 a year in income.
A look at one part of that group shows the extent of deductions.
Of the 1.8 million returns showing income of between $100,000 and $200,000 in 1988, for example, all but 97,000 itemized their returns and therefore would have been affected by the Pease plan. They took an average of $24,450 in deductions.
The biggest deductions were for interest payments, mostly home mortgages, and state and local taxes. Of the $41.5 billion worth of deductions taken by this group, $17.8 billion were for interest payments, $14.8 billion were for state and local taxes, $5.6 billion were for charitable contributions, $610 million were for moving expenses and $538 million were for medical and dental expenses.