Senators on Panel to Chip Away at Overhaul Plan : Small-Business Tax Breaks Vowed

The tax overhaul proposal of Senate Finance Committee Chairman Bob Packwood (R-Ore.) remained relatively intact during the first few days of his panel’s drafting sessions but members have made it clear that they will chip away at the plan in the weeks ahead.

In Wednesday’s session, several senators vowed to save small business almost $3 billion in taxes over five years by allowing them to continue using cash accounting methods. Sen. Max Baucus (D-Mont.) promised to defend small wholesalers and retailers. And Sen. Lloyd Bentsen (D-Tex.) said he will introduce an amendment on behalf of Sen. Lawton Chiles (D-Fla.) to help frost-affected orange growers in Florida.

The danger in adding one exception after another to the tax bill, warned Sen. Bill Bradley (D-N.J.) as the committee adjourned for a congressional recess of nearly two weeks, is that it will be “bled to death before you get to the critical portions.”

Tilted Against Wholesalers

In a candid appraisal, Packwood acknowledged that he has tilted his proposal against wholesalers and retailers, rejecting an Administration strategy to target some specific benefits to those business groups that consistently have supported the tax overhaul effort.

Instead, Packwood said he decided to provide greater tax relief to home builders and small business--despite their general opposition to tax revision--because they command greater appeal among members of the committee.

“All right, we’re taking care of America,” chided Sen. John H. Chafee (R-R.I.).

Packwood’s plan got off to a shaky start Monday when the committee voted unanimously to exempt buyers of all existing municipal bonds from a minimum tax aimed at ensuring that wealthy taxpayers cannot totally escape income taxes. Packwood even joined in opposition to his own proposal to tax current bonds, a move that signaled he would not try to revive on the Senate floor an idea that had briefly paralyzed the tax-exempt bond market.

The committee quickly followed up its initial concession to powerful Wall Street interest groups by joining Packwood in agreeing not to extract any significant sacrifices from timber, oil and mining industries that enjoy the protection of senior panel members.

Certain Groups Shielded

With only a few exceptions, both Republicans and Democrats on the committee appeared mostly interested in preserving tax breaks of important business groups rather than pursuing the goal of reining in current tax preferences to pay for lower tax rates.

When the committee began debating investment incentives, for example, members rushed to criticize Packwood’s initial proposal as too tough. Sen. Russell B. Long of Louisiana, the senior Democrat on the panel, advocated putting business-owned cars and light trucks in a more generous category, Sen. David L. Boren (D-Okla.) called for faster write-offs for oil refineries and Baucus said he would introduce an amendment to help purchasers of equipment used in making electronic chips.

With characteristic candor, Packwood summed it up: “I don’t think parochial interests are a bad thing at all.”

Despite the obstacles, Packwood said he is determined to push a bill through the committee and Long acknowledged that he probably would be able to achieve that goal.

The committee is all but certain to repeal the investment tax credit, Packwood said, raising nearly $143 billion over the next five years as the cornerstone of the tax revision bill.

End the ‘Charade’

For the moment, only one or two senators emerged as all-out opponents of the bill. Sen. Steven D. Symms (R-Ida.) continued to provide comic relief in the committee room, drawing laughter whenever he argued that the lawmakers working on tax revision should close up shop and end the “charade.” Sen. Malcolm Wallop (R-Wyo.) also registered his opposition to tax revision.

Packwood appeared far more worried about the efforts of other senators to gradually erode his proposals than the quixotic demands of Symms and Wallop.

In response to Symms, Packwood dismissed his complaints by joking: “Every time somebody meets, it upsets somebody. My guess is that when the Continental Congress met (beginning in 1774), it upset the (British) Parliament.”

But he was more forceful in his warning that committee members must balance their wishes to be more generous to business with the need to finally produce an overall bill that would not widen the federal budget deficit.

“If it’s loosen, loosen, loosen all the way,” Packwood said, “I can see disaster on the last day.”