Tax crusader sees slim chance of reform for now

WASHINGTON Mon Jul 25, 2011 10:20am EDT

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WASHINGTON (Reuters) - When the last top-to-bottom overhaul of the U.S. tax code happened, almost miraculously, in 1986, Bob McIntyre helped usher it in.

The unassuming and dogged tax activist -- whose research on corporations turned the head of President Ronald Reagan -- is pessimistic about another reform anytime soon, despite growing talk of a tax code overhaul in the urgent debt ceiling talks.

"It's going to take a different Congress," says the director of Citizens for Tax Justice, a not-for-profit group that advocates for fairer taxes for ordinary Americans.

From modest offices in Washington, McIntyre and a small staff crank out studies countering the agenda of the capital's legions of tax lobbyists for businesses and the wealthy.

The nonpartisan center leans decidedly leftward, but McIntyre, 62, does not hesitate to point the finger at Democrats or Republicans when he sees a tax inequity.

President Barack Obama? McIntyre says he sounded like a tax reformer early in his campaign, but he has changed.

"Obama's campaign platform owed a lot to us -- get rid of deferral for foreign profits; crack down on a whole array of tax shelters. It was great," he says.

"But as the campaign went on, people of influence started talking to him and he started scaling back ... Then he got elected and scaled back some more," McIntyre says.

Now, amid increasingly frantic debt ceiling negotiations, Obama and lawmakers are talking about agreeing to tackle tax reform in 2012, but analysts are skeptical that this could be done in an election year.

In the near term, McIntyre says, he doubts the debt ceiling discussions will produce meaningful new tax revenue as long as the House is controlled by Republicans who have nailed their flag to opposing any and all new taxes.

"I don't know how they switch on it," he says.

The center issued a high-profile report in June that said General Electric Co (GE.N), DuPont Co (DD.N), American Electric Power (AEP.N) and many other companies paid far less than the statutory 35-percent corporate tax rate from 2008 to 2010.

A more detailed report is expected within the next two months or so, said McIntyre from behind a desk cluttered with raw data and rough drafts requiring his review.

"For decades, Bob McIntyre has been blowing the whistle on the manipulation of our tax code," said Democratic Representative Lloyd Doggett.

"Bob and his indefatigable troops at Citizens for Tax Justice are an invaluable source of expertise to which I have turned again and again."

WORKED WITH NADER

After graduating from Providence College and University of Pennsylvania Law School, McIntyre was briefly a fellow at Georgetown University Law Center. He went to work in 1976 for consumer activist Ralph Nader as a tax researcher, then joined the newly set up Citizens for Tax Justice in 1980.

President Reagan, who had just been elected, famously slashed taxes in 1981. Then when a deep recession failed to ease, he reversed himself and raised taxes in 1982 and 1984, which was the year that McIntyre made his mark.

After months of poring over corporate reports and crunching the numbers on his own, McIntyre issued a study saying many large U.S. corporations paid no taxes between 1981 and 1983.

Reagan was informed that his secretary was paying more in taxes than GE, and that cemented the Republican president's growing conviction that a thorough tax code reform was needed. The result was the landmark Tax Reform Act of 1986.

Twenty-five years later, with no equally comprehensive effort intervening, "1986 is kind of like the Holy Grail in the tax academy," said University of Colorado Law School Associate Professor Victor Fleischer at a recent congressional hearing.

Many of the congressional aides who helped clean up the tax code in 1986 later resigned and became lobbyists. Their work since then has riddled the code with hundreds of loopholes.

McIntyre chuckles and recalls a quip from a mid-1980s farewell party for one tax aide. As he departed Capitol Hill for a lucrative job as a K Street lobbyist, the aide said: "We've done tax reform. Now we're going to do tax deform."

(Editing by Howard Goller)

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