How the influential win billions in special tax breaks

Imagine, if you will, that you are a tall, bald father of three living in a Northeast Philadelphia rowhouse and selling aluminum siding door-to-door for a living.

Imagine that you go to your congressman and ask him to insert a provision in the federal tax code that exempts tall, bald fathers of three living in Northeast Philadelphia and selling aluminum siding for a living from paying taxes on income from door-to-door sales.

Imagine further that your congressman cooperates, writes that exemption and inserts it into pending legislation. And that Congress then actually passes it into law.

Lots of luck.

The more than 80 million low- and middle-income individuals and families who pay federal taxes just don't get that kind of personal break. Nor for that matter do most upper-middle-class and affluent Americans.

But some people do.

Like Mrs. Joseph J. Ballard Jr., widow of a socially prominent Texas businessman. Geraldine Ballard lives in a $600,000 home in an exclusive Fort Worth enclave whose residents include Perry R. Bass, patriarch of the billionaire Bass oil and investments clan, and concert pianist Van Cliburn.

For her, tax writers have drafted the following paragraph that they intend to insert in tax legislation that Congress soon will take up:

For purposes of section 2656(b)(8) of the Internal Revenue Code of 1986, an individual who receives an interest in a charitable remainder unitrust shall be deemed to be the only noncharitable beneficiary of such trust if the interest in the trust passed to the individual under the will of a decedent who resided in Tarrant County, Texas, and died on October 28, 1983, at the age of 75, with a gross estate not exceeding $12.5 million, and the individual is the decedent's surviving spouse.

The paragraph will, if enacted into law, allow the estate of Geraldine Ballard's late husband to escape payment of an estimated $4 million in federal taxes that the Internal Revenue Service says the estate owes.

Tailored to meet the needs of a single taxpayer, the provision is just one of scores of similar special-interest deals awaiting congressional action.

Each would exempt a specific individual or corporation, or group of individuals and corporations - usually unnamed - from taxes that people and businesses in similar situations are obliged to pay.

When Geraldine Ballard was asked about the provision, she replied:

"I really just can't explain it because I don't understand it myself. . . . I have no earthly idea what they are doing. The Texas Bank of Commerce in Arlington handles it. It's a trust. I wish I could help you.

"I presume you are referring to the bill that Jim Wright was putting through? "

"Jim Wright" is the Fort Worth Democrat who is speaker of the House of Representatives.

When Congress passed the Tax Reform Act of 1986, radically overhauling the Internal Revenue Code, Rep. Dan Rostenkowski (D., Ill.), chairman of the tax- writing House Ways and Means Committee, hailed the effort as "a bill that reaches deep into our national sense of justice - and gives us back a trust in government that has slipped away in the maze of tax preferences for the rich and powerful. "

In fact, Rostenkowski and other self-styled reformers created a new maze of unprecedented favoritism. Working in secret, they wove at least 650 exemptions - preferences, really, for the rich and powerful - through the legislation, most written in cryptic legal and tax jargon that conceals the identity of the beneficiaries.

When they were finished, thousands of wealthy individuals and hundreds of businesses were absolved from paying billions upon billions of dollars in federal income taxes. It was, an Inquirer investigation has established, the largest tax giveaway in the 75-year history of the federal income tax.

There were provisions that accorded special treatment not available under either old or new tax laws. There were provisions that excused taxpayers from complying with IRS or court decisions holding them liable for payment of taxes. And there were provisions that merely granted exemptions from the tax law - licenses, if you will, not to pay taxes.

The recipients were, among others, White House dinner guests, members of Forbes magazine's directory of the 400 wealthiest Americans, corporate executives, major campaign contributors, companies that have slashed the pension or health-care benefits of their retirees, foreign investors, corporate raiders, former officials of federal agencies, personal or business friends of members of Congress, and businesses and individuals who paid little or no tax in the past.

That was Round 1.

Now, Congress is preparing to do it all over again, this time adding the private tax provisions to a so-called technical-corrections bill to remedy defects in the Tax Reform Act of 1986.

The cost of the latest round of special deals - many of which are still being written - already is approaching the multibillion-dollar range.

Whatever the final figure, it will come on top of the $10.6 billion outlay for such concessions in 1986. That $10.6 billion, by the way, was Congress' official estimate; the ultimate price tag, Inquirer projections show, could run two to three times that amount.

Even the understated $10.6 billion cost was substantial. It exceeds every

dollar paid in federal income tax for the next five years or more by low- and middle-income residents of Philadelphia.

As might be expected, congressional tax-writing committees prefer to shroud their work in secrecy, writing the private provisions in obscure language, as in the case of Geraldine Ballard. A sampling of exemptions from the 1986 act, and the beneficiaries of those exemptions as determined in an Inquirer investigation, illustrates the practice:

THE LAW. In the case of any pre-1987 open year, the amendment made by section 1275(b) shall not apply to any domestic corporation if . . . during the fiscal year which ended May 31, 1986, such corporation was actively engaged directly or through a subsidiary in the conduct of a trade or business in the Virgin Islands and such trade or business consists of business related to marine activities and . . . such corporation was incorporated on March 31, 1983, in Delaware.

THE BENEFICIARY. That paragraph describes Bizcap Inc., a Dallas firm whose principal stockholder - and thus the major beneficiary of the tax break - was William H. Bowen, a 71-year-old Dallas millionaire and supporter of conservative political candidates and causes.

Bizcap was in the category of corporations that a federal judge described as "the ultimate tax shelter," one that "was organized for the specific purpose of exploiting a gap" in federal law. It was incorporated in Delaware, established its headquarters on St. Thomas in the U.S. Virgin Islands, and generated most of its revenue from business interests in the United States.

Because it maintained an office in the Caribbean, Bizcap considered itself a foreign corporation for U.S. tax purposes and avoided payment of millions of dollars in income taxes on its U.S. investments. Tax authorities eventually caught on to the practice and issued a deficiency notice, claiming that Bizcap owed $5.1 million in unpaid income taxes for 1983 and 1984, and a negligence penalty of $767,554. The private tax law excused Bizcap from having to pay the taxes.

THE LAW. The amendments made by section 201 shall not apply to any property placed in service pursuant to a master plan which is clearly identifiable as of March 1, 1986, for any project described in any of the following subparagraphs . . . such project involves a port terminal and oil pipeline extending generally from the area of Los Angeles, California, to the area of Midland, Texas, and . . . before September 26, 1985, there is a binding contract for dredging and channeling with respect thereto and a management contract with a construction manager for such project.

THE BENEFICIARY. That paragraph describes a 1,032-mile, $1.7 billion pipeline that will carry Alaskan crude oil from tankers berthed in the Long Beach, Calif., harbor to Midland, Texas, where it will feed into an existing pipeline network leading to refineries along the Gulf Coast and in the Midwest. It is to be built by the Pacific & Texas Pipeline & Transportation Co. of Long Beach. The company is the creation of Cecil R. Owens, a promoter and real estate developer whose investment activities first caught the attention of the U.S. Securities and Exchange Commission in 1985.

In a lawsuit filed last September in federal court in Los Angeles, the SEC contended that Owens and his company made fraudulent claims in the sale of $2.1 million worth of unregistered Pacific & Texas stock. Investors, the SEC said, were promised a yearly return of 500 percent on their money. The SEC said the company also neglected to mention to potential investors that it had paid nearly a half-million dollars on Owens' behalf for "among other things, travel, living expenses, lobbying and entertainment, political contributions and various business expenses. "

Without admitting or denying the government's allegations, Owens and his company consented to the issuance of a permanent injunction prohibiting both

from engaging in unlawful securities practices.

Because of the pipeline exemption in the 1986 tax act, the company ultimately may avoid payment of about a half-billion dollars in federal income taxes. The project is to be financed in part with tax-exempt bonds and it will qualify for the investment tax credit and accelerated depreciation that have been canceled for ordinary businesses and investors.

THE LAW. The amendments made by section 201 shall not apply to any property which is part of a project . . . which is certified by the Federal Energy Regulatory Commission before March 2, 1986, as a qualifying facility for purposes of the Public Utility Regulatory Policies Act of 1978 . . .

THE BENEFICIARY. That paragraph describes hundreds of companies and individuals who are investors in alternative-energy facilities, including a cogeneration plant near Pottsville in Schuylkill County, Pa., that has just begun its test phase, producing electricity from coal refuse.

It will allow investors in the plant to avoid payment of an estimated $26 million in income taxes. The plant is a joint venture of subsidiaries, affiliates or companies that share common ownership with the Bechtel Group Inc. of San Francisco, a global construction and engineering company; Pyropower Corp. of San Diego, a designer of cogeneration equipment, and the Gilberton Coal Co. of Pottsville.

The facility, known as the John B. Rich Memorial Power Station, is named in memory of one of Northeast Pennsylvania's most powerful coal barons, whose descendants own the Gilberton Coal Co. Rich was convicted in 1965 of federal charges that he and his Gilberton Coal Co. filed false and fraudulent tax returns and evaded individual and corporate income taxes. He and the company paid back taxes, fines and costs totaling one-third of a million dollars; a prison sentence was suspended and he was placed on probation for three years.

The Bechtel Group and its owners, the Bechtel family - whose holdings have been valued at close to $1 billion - have a direct or indirect stake in tax breaks worth tens of millions of dollars in the 1986 act.

THE LAW. Treatment of certain partnerships. In the case of a partnership with a taxable year beginning May 1, 1986, if such partnership realized net capital gain during the period beginning on the first day of such taxable year and ending on May 29, 1986, pursuant to an indemnity agreement dated May 6, 1986, then such partnership may elect to treat each asset to which such net capital gain relates as having been distributed to the partners of such partnership in proportion to their distributive share of the capital gain or loss realized by the partnership with respect to each asset . . .

THE BENEFICIARY. That paragraph describes the partnership that became Bear Stearns Cos. Inc., a Wall Street investment banking and brokerage firm and one of the dozen largest member-firms of the New York Stock Exchange. It will save Bear Stearns partners an estimated $8 million in taxes.

Among the partners are Alan C. Greenberg, chairman of the board and chief executive officer, whose $5.7 million in cash compensation in 1986 made him the highest-paid executive of a publicly owned Wall Street brokerage. Others include:

James E. Cayne and E. John Rosenwald Jr., both members of the office of the president, who each earned $3.9 million in 1986; Alvin H. Einbender, executive vice president and chief operating officer, who earned $3.7 million, and Thomas R. Anderson and Denis P. Coleman Jr., both executive vice presidents, who each earned $3.4 million.

THE LAW. The amendments made by section 201 shall not apply to two new automobile carrier vessels which will cost approximately $47 million and will be constructed by a United States-flag carrier to operate, under the United States flag and with an American crew, to transport foreign automobiles to the United States, in a case where negotiations for such transportation arrangements commenced in April 1985, formal contract bids were submitted prior to the end of 1985, and definitive transportation contracts were awarded in May 1986.

THE BENEFICIARY. That paragraph describes Central Gulf Lines, the principal subsidiary of International Shipholding Corp. in New Orleans. It will save the company an estimated $8 million in taxes by allowing it to claim the investment tax credit and accelerated depreciation that Congress terminated for most corporate taxpayers.

Millionaire brothers Niels W. Johnsen of Rumson, N.J., and Erik F. Johnsen of New Orleans own 40 percent of the stock of International Shipholding Corp.

The two ships given favored tax treatment were built in shipyards in Japan and are carrying Japanese-manufactured autos to U.S. dealers. Each has a capacity for about 4,000 cars. The Green Lake made its maiden voyage last October, arriving in Baltimore with a load of Toyotas. The second vessel, the Green Bay, made its first voyage last November, arriving at Long Beach, Calif., with a load of Hondas.

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On Capitol Hill, such tax concessions are known as transition rules. In the beginning, they were intended to cushion the impact of tax-law revisions.

Lawmakers reasoned that when individuals or corporations entered into business, investment or financial arrangements based on one law, it was unfair to abruptly alter the law.

Sen. Bob Packwood (R., Ore.), who as chairman of the Senate Finance Committee personally passed on the rules inserted in the 1986 act, explained at the time the rationale for the exceptions:

"Transition rules are designed to ease the passage from the present law to the new law. These are necessary because people had relied upon the law as it was. In those cases, they deserved a transition. "

That was a definition that would have applied in the 1950s, a time when massive overhauls of the Internal Revenue Code were a rarity. In fact, the 1954 revision was the most far-reaching in decades.

But by the 1980s, when Congress took to revising the tax code every year or two, adding thousands of pages of new laws and regulations, the old reasoning made little sense.

Lawmakers rewrote the code in 1981, 1982, 1984 and 1986, and in two of those years, 1981 and 1986, the changes touched the daily lives of every taxpayer.

This meant that if Congress intended to be fair, it would have to enact transition rules for millions of taxpayers, or none. Instead, it chose to give relief to select individuals and corporations.

As a result, most transition rules became little more than grants of immunity to those whose power and influence gave them access to congressional tax writers.

It is in that context that Congress now is preparing for a replay of 1986.

Passage of a major tax bill customarily is followed by legislation to correct inevitable typographical, spelling, punctuation, capitalization and other errors.

In the case of the 1986 Tax Reform Act, there are errant commas to be removed, parentheses to be closed or opened, capital letters to be made lower case and paragraphs to be renumbered.

One section refers to "New Orleans" when it should be "Pensacola. " Another refers to "real" when it should be "rail. " "Spring cotton" should be "spray cotton. " "Diversatch" should be "Diversatech. " And ''1935" should be "1985. "

Then there is the transition rule written into the law to grant special treatment in connection with the issuance of tax-exempt bonds in an unnamed state.

The law says in part that "a bond is described in this paragraph if . . . such bond is issued before Jan. 1, 1993, by a state admitted to the Union on June 14, 1776 . . . "

The Union, of course, did not exist on June 14, 1776, a date three weeks before approval of the Declaration of Independence, and 11 years before Delaware became the first state. Such is the way that tax laws are written.

Legislation introduced last week by the House Ways and Means and Senate Finance Committees will rectify these and other mistakes. It will also do something else. It will serve as a vehicle for Round 2 of congressional tax giveaways.

Lobbyists, lawyers and lawmakers - many of whom missed out on the tax- preference windfall in 1986 - are scurrying to include their clients and constituents in the second round.

Some are seeking remedies for businesses and individuals placed at a disadvantage when Congress indiscriminately penalized some taxpayers and rewarded others the last time. Some are seeking a fresh batch of tax favors. Some are seeking to correct what they perceive as legislative mistakes or oversights.

The drive to secure the breaks has become so intense that Congress may delay action on the technical-corrections legislation until after the November election.

The reason: Each new break adds to the federal deficit and encourages other members of Congress to seek similar, or additional, exemptions from a tax law that everyone else must comply with. In an election year - or, more accurately, in the months before an election - lawmakers would prefer to avoid publicity about arranging tax breaks for exclusive constituents. This leaves the tax-writing committees with four choices:

Enact a pure technical-corrections bill without any special breaks; drastically limit the number of such breaks to be included in the bill; postpone action on the legislation until after the election, when the bill can be loaded with concessions without incurring voter wrath, or enact a pure bill and, after the election, bury the breaks in other legislation.

Whatever happens, about all that can be said for certain, given Congress' record to date, is that the personal tax provisions will be cloaked in secrecy.

Members of the three tax-writing committees - the House Ways and Means Committee, Senate Finance Committee and Joint Committee on Taxation - have on occasion identified the beneficiaries of transition rules.

They also have concealed them.

It is possible, in a methodical reading of the more than three million words that make up the Internal Revenue Code - that's roughly the equivalent of five copies of War and Peace - to uncover some special-interest provisions.

But it is impossible to detect them all, since many are phrased in a way that disguises their true intent. Furthermore, others are slipped into the hundreds of bills that Congress enacts each year that are unrelated to the income tax.

These practices permit members of the tax-writing committees, when they choose to do so, to guarantee complete anonymity for those individuals and corporations excused from paying taxes.

With certain exceptions, lawmakers who request the private tax laws refuse to acknowledge their involvement, presumably for fear of antagonizing the mass of taxpaying voters who never receive preferential treatment.

Likewise, the tax-writing committees and their staffs refuse to identify those lawmakers, who, in the words of one congressman, dispense "favors to individuals the way royalty might do. "

According to the official tabulation by the Senate Finance Committee and Joint Committee on Taxation, the 1986 Tax Reform Act contained about 650 provisions that they designated as transition rules.

The figure, like much of what the reformers had to say about their legislative handiwork, was both incorrect and misleading.

The tax-writing committees and their staffs misidentified the recipients of some tax gifts and omitted others - like Bizcap - from their tally.

An Inquirer investigation has established that the actual number of individuals who will profit from the special rules will run into the thousands. Most cannot be identified beyond their economic status - upper income.

The Senate Finance Committee staff also reported that the various concessions would result in a revenue loss of $10.6 billion, a figure that was certified by the Joint Committee on Taxation, the body with final responsibility for tax data. The estimate was as illusory as the reported number of tax dispensations.

The cost of one break was originally placed by the Joint Committee at $300 million. After passage of the legislation, the figure was adjusted upward to $7 billion.

That worked out to a 2,233 percent miscalculation, a mistake so large as to defy comprehension. It would be roughly akin to a family who bought a house expecting to pay $400 a month on its mortgage but who discovered, belatedly, the payments would actually be $9,332 a month.

It seems the tax writers intended to construct a law that only a small number of wealthy people could take advantage of. Instead, they wrote it in such a way that virtually all wealthy people could profit from it.

Congress responded as only Congress can do. It rephrased the provision to meet the original intent, inserted it in the federal budget bill enacted last

December and promptly announced that the change constituted a tax increase that would generate billions of dollars in new revenue.

ESTIMATING THE COSTS

How do such errors come about?

When a member of a tax-writing committee suggests a specific tax break, a U.S. Treasury official explained, the committee staff makes an estimate based on the proposal.

But the "wording of the statute has not been finalized," he said, "and the people who are finalizing the language are not the ones who have been involved in making the estimate. "

"So there's a misunderstanding between them that only becomes apparent after one sees the estimate by itself and also has the luxury of being able to see the wording of the statute. "

Such blunders aside, even the understated $10.6 billion revenue-loss estimate from the 1986 tax bill represents a major drain when measured against the federal taxes that others must pay.

It exceeds the income taxes that will be paid by all low- and middle-income individuals and families in Vermont, South Dakota and Wyoming for the next five years.

It exceeds the telephone excise tax that will be paid through much of the 1990s by all low- and middle-income individuals and families - a regressive tax that was due to expire last December but that Congress retained in order to raise revenue to meet its budget goals.

It is the equivalent of the income tax that will be paid by 1 million

families earning $25,000 annually for the next five years.

Indeed, ordinary taxpayers across the country must make up part of the lost revenue. They are the individuals and families who, under the 1986 Tax Reform Act, are being taxed for the first time on college fellowships, full unemployment compensation benefits and some unreimbursed employee business expenses and who have lost all or part of their traditional deductions for medical expenses, sales taxes and consumer interest.

They are the individuals and families who, in many cases, will pay higher taxes this year as a result of Congress' decision to gut the progressive rate system and to tax a single professional woman who earns $25,000 at the same marginal 28 percent rate as an investor who earns $25 million.

They are the individuals and families who Jan. 1 began paying higher Social Security taxes - another levy borne disproportionately by low- and middle- income people - and who will see that tax go up again in 1990.

Congress' tax reformers, to be sure, downplay the cost of personal tax breaks and chide critics of them.

"In the overall scheme of events," said Bob Packwood just prior to enactment of the 1986 act, a few billion dollars in transition rules represents "a relatively minor part of the whole bill. "

THE DEFICITS GROW

It was - and is - such an attitude that has contributed to the runaway federal deficits of the 1980s. And it explains why the 1988 deficit will be up, rather than down, as the reformers promised when they sold the 1986 tax act.

For the first five months of the current fiscal year that began last October, the government is running $89.7 billion in the red. That exceeds the $72.7 billion deficit posted for the entire year of 1980, when Ronald Reagan was campaigning for his first term.

It also surpasses the cumulative deficits for all of the 1950s and virtually all of the 1960s, thereby guaranteeing that more and more tax

dollars will be diverted to interest payments on a $2.4 trillion - and fast growing - national debt.

With seven more months to go in the fiscal year, and a deficit already of $89.7 billion, Congress will not come close to meeting the goals set in the 1985 deficit reduction law that was to move the government into the black - permanently.

Dubbed Gramm-Rudman-Hollings for its three sponsors - Sens. Phil Gramm (R., Texas), Warren B. Rudman (R., N.H.) and Ernest F. Hollings (D., S.C.) - the law set a maximum deficit of $108 billion for 1988.

Congress recast the Gramm-Rudman-Hollings targets last year and fixed the new 1988 maximum at $144 billion, a figure that the government still may not meet.

All this notwithstanding the euphoric statements by congressional leaders last December when they pushed through federal budget and spending bills that were widely - and incorrectly - portrayed as deficit-cutting measures.

Sen. John F. Kerry (D., Mass.) described the legislation as "welcome relief from the distorted budgetary pattern of 1980 to 1987. " It will, he said, "reduce the federal deficit by $80 billion within two years, by cutting $33.7 billion in 1988 and $46 billion in 1989. "

Sen. Robert C. Byrd (D., W.Va.), Senate majority leader, applauded the measure as "the largest two-year legislative package of permanent deficit reduction. That is not a mouse. It is an achievement of which we can be proud. "

What the legislation did was allow members of Congress seeking re-election, as well as those seeking their party's presidential nomination, to put off until some time after the November 1988 election the tough decisions that will have to be made on stiff tax increases and sharp spending cuts.

In the meantime, some lawmakers are quietly building support among their colleagues for enacting new taxes and raising existing ones. Among their favorites: A national sales tax, a value-added tax and a whopping increase in the gasoline tax.

Each of the taxes is regressive. Each would fall disproportionately on low- and middle-income individuals and families.

The value-added tax is especially appealing to certain members of Congress

because it is a hidden levy. It is, in effect, a multiple sales tax built into the cost of consumer goods at different stages in the manufacturing process. As a result, consumers are unable to determine how much tax they are paying.

Whatever the economic cost of personal tax breaks, it is dwarfed by the cost in fairness.

In 1986, Congress extended preferential treatment to thousands of individual taxpayers and hundreds of companies at the expense of other individuals and companies in similar situations.

It gave tax breaks to urban development projects in some cities and withheld them in others. It gave tax breaks to some trucking companies and withheld them from others. It gave tax breaks to some insurance companies and withheld them from others. It gave tax breaks to some housing projects and withheld them from others. It gave tax breaks to some utilities and withheld them from others. It gave tax breaks to some universities and withheld them

from others. It gave tax breaks to some communications companies and withheld them from others. It gave tax breaks to the steel industry and withheld them

from the copper industry.

Without exception, Congress denied comparable breaks to middle-income taxpayers who shoulder the brunt of the overall federal tax burden. But this was in keeping with the way Congress has been making tax law since the late 1960s.

And it was typical of so many legislative revisions that have fueled a growing distrust of the tax system among middle-class taxpayers, an attitude that has been reflected in one public opinion poll after another.

That distrust - rooted in the belief that there is one set of rules for the ordinary citizen and another set for the privileged - surfaced in the 1970s and has led to steadily rising noncompliance by taxpayers seeking to avoid, or even evade, their taxes.

The 1986 tax act did nothing to dispel the belief that the system is riddled with inequities.

For example, Congress eliminated the deduction for interest payments on student loans for millions of middle-income taxpayers, but offered no special exemptions.

It eliminated the investment tax credit for family farmers who bought tractors, but offered no special exemptions.

It eliminated the investment tax credit for drivers who own their tractor- trailer rigs, but offered no special exemptions.

Congress did, however, grant a special exemption that lowered the tax rate on a millionaire securities dealer.

It did grant a special exemption that allowed a wealthy Chicago family to claim the investment tax credit on a warehouse.

And it did grant a special exemption that permits a large trucking company, whose principal owner is a major contributor to the Republican Party, to claim the investment tax credit on its trucks.

The disparate treatment was more evident when considering two specific groups of taxpayers and two specific changes in the law.

In 1984, the latest year for which complete figures are available, 11.7 million families with annual incomes of $20,000 to $40,000 claimed the working-couple deduction. It allowed them to avoid more than $1.5 billion in taxes.

Because Congress, in the 1986 tax act, eliminated that deduction - without any exceptions - all 11.7 million families lose it when they file returns this year, and many will pay higher taxes as a consequence.

Again during 1984, about 400,000 individuals and families with incomes above $100,000 claimed the investment tax credit. The writeoff allowed them to avoid $1.6 billion in taxes.

Like the working-couple deduction, the investment tax credit was eliminated. But not for everyone. Through personal tax breaks, Congress retained the credit for thousands of upper-income taxpayers.

All this helps explain why the House Ways and Means Committee and Senate Finance Committee have resolutely refused to name individual lawmakers who request tax-immunity provisions for constituents.

It helps explain why the provisions are couched in language that conceals the beneficiary's identity.

And it helps explain why the tax-writing committees decline to say how many people and companies are in situations similar to those of the beneficiaries, yet do not receive special consideration.

The entire legislative process surrounding tax indulgences is so dependent on congressional secrecy that most members of Congress are unaware of the provisions when they vote on tax legislation.

In 1986, congressional leaders withheld even a partial list of tax preferences from House members until after they voted in favor of the legislation.

The process has become so byzantine that, at times, key lawmakers involved in writing tax bills profess their ignorance about breaks that they personally approved.

Just before the Senate ratified the Tax Reform Act of 1986, Sen. Howard M. Metzenbaum (D., Ohio) questioned the Senate Finance Committee's Bob Packwood about one particular provision.

Referring to a vaguely worded clause that would permit anonymous dairy farmers, located mostly in California and Nebraska, to escape payment of $22 million in taxes, Metzenbaum asked:

"I think we have a right to know. Who are those persons? What do they have going for them? Are they small farmers? Are they large corporations? More importantly, maybe, are they American-owned? Are they foreign corporations? Are they foreign-owned corporations? "

Packwood, who with Dan Rostenkowski was responsible for approving or rejecting the custom-tailored tax breaks, replied:

"I have no idea who the individual or corporate beneficiaries are."