When word leaked in March that the White House was mulling a new gambling tax to help pay for welfare reform, the gaming industry went on full alert. Nevada Governor Bob Miller, an early supporter of Bill Clinton's Presidential bid, flew to Washington with a stack of industry statistics projecting that a gaming tax would shutter casinos and throw 30,000 people out of work. Meanwhile, up in Congress, owners of Thoroughbred racehorses and dog-racing tracks from New York to Texas warned members of equally dire consequences.
Faster than you can say "snake eyes," the President took the tax off the table. "He told me he was impressed by the support we had gathered," Miller says.
SMOKESCREEN. Stunned would be more like it. Clinton rode into town carrying a satchel of earnest social programs that ranged from fixing welfare to curing an ailing health system. With the public in no mood to accept broad-based tax increases, he reckoned he'd get the cash from taxes opposed by the Sin Lobby--those industries that turn clean-livers into smokers, drinkers, and gamblers.
He has since discovered that the odds were against him. Marshaling huge war chests, sophisticated grassroots operations, and some of the capital's savviest hired guns, the alcohol, gambling, and tobacco industries have separately fended off most of Clinton's assaults.
No question, the White House underestimated the industries' might. Rather than winning the moral high ground, the White House was caught off guard when the Sin Lobby redefined the offensive as an assault on average people. "It's a cultural thing," says David K. Rehr, lobbyist for the National Beer Wholesalers' Assn. "The affluent folks in Washington say, `Let's tax the few pleasures of the working man."'
Even cigarette makers are scoring big points by arguing that the little guy--from laborers to small-business owners--would bear the brunt of the tax onslaught. On June 30, the House Ways & Means Committee scaled back White House plans to raise tobacco taxes by 75 cents a pack to finance health reform. The panel's vote instead for a 45 cents hike was partly due to a tobacco-industry strategy to let groups with a better public image lead the charge.
Last March, some 10,000 tobacco workers stormed Washington, arguing that U.S. manufacturers would move plants abroad if the federal tax soared. Trucking unions joined in, taking claims of job losses to Representative John D. Dingell (D-Mich.), chairman of the House Energy & Commerce Committee. Meanwhile, convenience-store owners--small-business operators that Clinton touts as the engine of economic growth--fanned out on Capitol Hill in June, warning that tax hikes would encourage bootleggers. "We have representatives in every state," says Frank Colaccino, chief executive of Dairy Mart Convenience Stores Inc. in Enfield, Conn. "We should get heard."
At the same time, the tobacco industry, reeling from an antismoking movement and a regulatory assault, has been playing the inside game. It has aimed its firepower at lawmakers who represent areas where growers and manufacturers sustain the local economy. The industry told lawmakers in closed-door meetings that defectors would lose support if they abandoned hometown companies.
With Clinton's health plan imperiled, the bloc of 20 or so tobacco-state Democrats are key. Without them, argues Representative Rick Boucher (D-Va.), "you don't have enough to prevail."
SIX-PAC? The Administration has learned that the alcohol lobby is no fun to tangle with, either. Last year, the White House considered raising alcohol taxes to pay for Clinton's "investment" agenda and health reform. But pressure from the lobby made him back off.
The brewing industry figured big in his about-face. The Beer Institute is headed by Raymond J. McGrath, a former House Ways & Means member. House Majority Leader Richard A. Gephardt (D-Mo.), who represents the St. Louis district that includes the Anheuser-Busch Cos., took up the cudgel against new taxes.
With beer distributors--and drinkers-- in every congressional district, the industry began a grassroots campaign pitting Joe Sixpack against the elite. Wholesalers and brewers argued that half of beer drinkers earned less than $35,000 a year and that Republicans could use the issue to appeal to Reagan Democrats. Clinton's political advisers warned the President to retreat, too.
The beer lobby's ace in the hole may have been Anheuser-Busch Chairman August A. Busch III, who has developed a close relationship with Clinton. A top Administration official says Busch "never weighed in heavily" against higher alcohol taxes. Still, his appearance with other chief executives at the White House in February, 1993, to support the President's economic plan coincided with Clinton's announcement that an alcohol tax was out. The next day, Clinton flew to St. Louis to push his plan.
ALL FOR ONE. Unaccustomed to being a federal target, gaming interests took another tack when the White House weighed a 4% tax on gross receipts of gambling operations: hiring big outside guns. The Nevada Resort Assn. called en former GOP Senator Paul Laxalt and Lloyd N. Hand, a onetime aide to Lyndon B. Johnson, to organize a blitz. Casino mogul Donald Trump even made a trip to see Dan Rostenkowski (D-Ill.), then Ways & Means chairman.
Hoping to broaden the campaign beyond the gambling industry, the lobbyists quickly patched together a coalition of 30 industry groups representing everything from racetracks to airlines to hotels. The travel industry argued that a gaming tax would depress tourism. It also feared the Administration would tax other "frivolous" pursuits later on. "Business interests were saying, `We can't let them pick people off one by one because we could be next,"' says Wayne E. Mehl, a lobbyist for Nevada resorts.
But pure politics was certainly the most compelling reason for the White House flip-flop. Nevada Governor Miller and Senator Richard H. Bryan, both Democrats, reminded Chief of Staff Thomas F. McLarty III in March that they were up for reelection. How would it look if a Democratic President taxed the state's leading industry? Clinton also was dissuaded by a letter from 31 governors warning that a tax hike would torpedo their budgets.
For now, only tobacco remains on the firing line. But with a cash-starved Administration always on the prowl for deep pockets, the triumphant Sin Lobby isn't taking anything for granted. It's this siege mentality that helps account for Clinton Administration reformers' newfound recognition that in Washington, the wages of sin often prevail over high-minded intentions.