Gaming the tax code is resurgent again in corporate America and was documented by Robert McIntyre of Citizens for Tax Justice in an alarming study released last October (largely neglected amid pre-election tumult). Among 250 of the biggest corporations, McIntyre found forty-one that, like Alcoa, had dodged taxes altogether in one or more years from 1996 through 1998. They paid less than zero on $25.8 billion in profits and collected $3.2 billion in rebates. In 1998, the needy cases included PepsiCo, Pfizer, J.P. Morgan, Enron, Weyerhaeuser, General Motors, MCI Worldcom and CSX. O'Neill is right to say the tax code is an "abomination" in need of reform. He only has the direction wrong.

Beyond corporations, the talking Secretary seems to be driving toward a larger point: Wealth accumulation should not be taxed in any form. It's hard to say for sure because his remarks are often elliptical to the point of incoherence. But the new Treasury boss did overrule his own department's policy staff and withdraw from an inquiry by the Organization for Economic Cooperation and Development into offshore tax havens that allow wealthy people to hide investment money and evade taxes at home [see Lucy Komisar, "After Dirty Air, Dirty Money," June 18]. O'Neill parroted the right-wing line that this modest reform effort might discourage low tax rates in Caribbean islands where the money is parked.

Though the Secretary waxes philosophical on the subject of wealth and taxes, his personal behavior could be mistaken for that of a regular old greedhead. When he took office, O'Neill brushed aside the conflict-of-interest rules and decided he wouldn't sell his shares in Alcoa, the bulk of his $62 million in assets. He relented once an uproar ensued, but the Secretary sold off his shares v-e-r-y slowly, while Alcoa's stock price was rising nearly 30 percent. Unlike some of the rest of us, this man has saved up for retirement. Besides, he is already receiving an annual pension of $926,000 from his old employer. The repeal of the inheritance tax will save his heirs $30-75 million, by McIntyre's estimate. So, hey, who needs Social Security anyway? O'Neill envisions instead a relatively small welfare program limited to the truly deserving lame and halt.

On the subject of tax theory, O'Neill strikes a tone of moral indignation. "We've gotten to the issue of thinking about taxing income and wealth as though they are two separate things," he mused. "And you can make an argument--I think a fair argument--that people should be taxed on period income, which means the amount of income that comes in some particular calendar period." This sounds like he thinks the passive accumulation of wealth over many years from appreciating stocks and other assets should not be taxed--a cute way of saying, Let's repeal the capital gains tax on individuals too, along with the inheritance tax. Others interpret his remarks as obliquely favoring a national sales tax to replace the lost revenue from corporations--putting the full burden on consumers, where he thinks it belongs.

O'Neill's perspective demonstrates how far the moral fulcrum has gravitated in the conservative era. A generation ago, it was assumed that income earned from human labor was morally more deserving than income accumulated passively from invested wealth. "Unearned income," as it was then called, was taxed at a higher rate than wage and salary income. The preference for human labor was repealed in the Reagan tax cut, and now O'Neill seems to envision the next step: giving full preference to wealth by not taxing it at all.

Should we worry about this loose talk? Not much, thinks Bob McIntyre, who has been a watchdog critic of tax-code inequities for two decades. "To do any of these things he wants would almost certainly cost a ton of money, and they already broke the bank with the tax cuts," McIntyre said. And with Democrats taking charge of the Senate, the political obstacles have recently become more formidable.

Nevertheless, the corporate-conservative movement has prospered by taking the long view of politics--talking up the most improbable propositions, year after year, and creating a framework for public debate that makes looting the Treasury sound like a moral crusade. This appears to be O'Neill's noble mission too--beating the drum for "tax reform" by grossly falsifying the fundamentals. The odds are against immediate action, of course, but his righteous chatter starts us down the road and ought to be vigorously refuted, right now, before it poisons the climate of public understanding. Ten years ago, while Democrats smirked, the Republicans started popularizing the "death tax" as a cause for righteous indignation. They found farmers and small business owners to front for the issue, even though it was obvious that only the very wealthy would benefit. This year, the long-running agitation paid off for George W. Bush when the inheritance tax was repealed--despite the gross injustice. A lot of Democrats voted for it too.

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