Packwood to Fight for Timber Industry’s Tax Breaks

Senate Finance Committee Chairman Bob Packwood (R-Ore.) vowed Wednesday to do everything he can to kill President Reagan’s tax revision proposal unless tax breaks for the timber industry remain on the books.

The announcement by Packwood, who earlier had signaled his intention to support the White House plan after it was modified to overcome his initial objections, caught the Administration by surprise, and even some of his own staff members were stunned by the sudden reversal.

‘This Is Quite a Switch’

“I thought we were for tax reform,” one committee staff member said. “This is quite a switch.”

Packwood’s statement was the latest in a series of setbacks that Reagan’s tax package has suffered in recent weeks, reflecting a rising boldness on the part of Senate Republicans willing to challenge the President on tax reform.

‘Open Season on Reform’

“I’m afraid this is the signal that it’s open season on tax reform,” one Administration official said. “If Packwood can win on timber, then there’s nothing to stop every other member from demanding (that) his own tax break be put back in.”

At what was to have been a routine committee hearing on aspects of the tax plan affecting timber and other industries, Packwood opened the session by insisting: “I will not stand by and see the principal industry in my state unfairly singled out, (with) that act alone causing the loss of thousands of jobs in Oregon.”

Among other changes noted by Packwood, Reagan’s plan would eliminate special capital gains treatment for the timber industry and eliminate the investment tax credit for timber and all other industries.

Warning to Baker

Packwood said he told Treasury Secretary James A. Baker III a week before the plan was presented that he “would do everything possible to kill the unfair timber tax changes in the bill,” adding: “If I fail in that, I will do everything possible to kill the entire bill.”

However, Treasury officials argued that Packwood had voiced only limited objections to the timber provisions in the tax package, focusing nearly all of his attention on an earlier proposal by the Treasury Department to tax most employer-paid fringe benefits, including health insurance premiums that exceed a certain amount.

When the White House modified its package, dropping the tax on all but a small portion of health insurance premiums, Packwood expressed support of the tax revision concept and promised to help push a bill through Congress this year.

Growing List of Objections

Packwood also recently has complained about the proposed elimination of the two-earner tax deduction in the White House package, and his growing list of objections to the plan suggests that he is relatively unworried that voters may turn against politicians who oppose tax reform.

“If anything, the problem with tax reform is when we go home the public kind of yawns,” Packwood said Tuesday.

He made his comments only a day after House Speaker Thomas P. (Tip) O’Neill Jr. (D-Mass.) said approval of an overall tax measure is unlikely this year, even if the House agrees on a bill. “I doubt the Senate is going to bring it up,” O’Neill said.

The Democratic-controlled House generally has taken the lead in Congress on the tax issue, with Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) in charge of shepherding the tax bill. Packwood continued to argue Wednesday that a tax measure could be approved by the Senate this year if the House passes a bill by Oct. 15.

But one staff member on the Ways and Means Committee called Packwood’s latest statement “a serious blow to tax reform.” If the Administration allows Packwood to chip away at the tax proposal for his local interests, the aide added, it would be in danger of seeing the overall plan gutted by “all kinds of special interests lining up with their own list of demands.”