(FORTUNE Magazine) – Lobbying is supposed to be a subtle art, and even the highest-priced influence peddlers in Washington can fail if they ignore that fact and engage in artless tactics. A classic case was in 1990 when the stock and mutual insurance companies pressed Congress so hard to inflict higher taxes on each other that they both got whacked, partly as retribution for being so obnoxious. Now it may be the airlines' turn. On one side are the seven largest full-fare airlines--American, Continental, Delta, Northwest, Trans World, United, and US Airways. On the other are the smaller discount airlines led by that upstart, Southwest. The so-called Gang of Seven wants to alter the airline ticket tax--now a flat 10% of the ticket price--to shift more of its burden to Southwest, all in the name of "fairness." Southwest thinks the tax (which favors discounters) is just fine.

The combatants have meticulously armed themselves with the best lobbying talent money can buy. Various members of the Gang of Seven have hired Haley Barbour, ex-chairman of the Republican Party, Linda Daschle, wife of the Senate minority leader and former acting administrator of the Federal Aviation Administration, and James Burnley, transportation secretary under President Reagan. Not to be outgunned, the discounters, which include Alaska Air and Reno Air, have retained two former members of the Ways and Means Committee, Democrat Tom Downey and Republican Rod Chandler. Moreover, Southwest's colorful chairman, Herb Kelleher, became the discounters' most visible and flamboyant spokesman around Washington. Not long ago, in a private meeting with Charles Rangel (the New York Congressman who is the ranking Democrat on Ways and Means), Kelleher actually knelt to plead his case.

But as with the stocks and mutuals, all of this was perceived by lawmakers as wretched excess. The airlines made the mistake of squabbling over a tax at the very moment Congress was hungering for new revenue to reduce the budget deficit. And the fact that the airlines hired so many big names called attention to their vulnerability. Admits Southwest vice president Ron Ricks: "The industry has got itself into a real fine mess."

FORTUNE has learned that Chairman Bill Archer of the Ways and Means Committee is leaning toward altering the ticket tax in a way that would make both sides losers. The initial document that will guide the House's tax-law drafting sessions this month--called "the chairman's mark" in Washington argot--is likely to reconfigure the tax so it would be based partly on a fee tied to the ticket's price and partly on a flat fee per passenger. The legislation would also impose a new tax on passengers who buy tickets with frequent-flier miles and, perhaps, on airline employees and their families who currently fly free. In addition, international passengers would be hit with higher taxes. One possibility is an increase in the departure tax (currently $6 per passenger), in addition to new taxes on arrivals and on the domestic legs of international travel. Another alternative would tax passengers for the portions of their international flights that are covered by U.S. air-traffic controllers.

If written into law, the proposal would be a defeat for both sides. The moral of the story? Even in Washington, sometimes less is more.

--Jeffrey H. Birnbaum