Has Consensus on Tax Reform, Packwood Says

The Senate Finance Committee reached a consensus on a “genuine tax reform” proposal today that would slash tax rates, close loopholes and wipe out many deductions, Chairman Bob Packwood (R-Ore.) said.

Packwood, emerging from a closed-door session where the panel has been discussing tax reform options all week, said: “A group of us has reached a consensus on a package. I think it’s a majority.”

He said the panel will resume public sessions Monday to debate this latest draft in the long, tortuous road to tax reform.

Packwood said the proposal would replace the current system of more than 14 tax brackets for individuals with two rates: 15% and 27%. By raising the standard deduction and nearly doubling the personal exemption to $2,000, it would eliminate about 6 million poor Americans from the tax rolls.

“I hope the public will regard this as genuine tax reform,” Packwood said during an impromptu news conference. He was flanked by six other committee members, equally divided by party but short of the 11 senators he would need for a bare majority on his 20-member panel.

Hopes for Majority

“I hope there is a majority for it,” Packwood said.

Packwood said about 80% of Americans would fall into the 15% tax bracket under the new proposal. A family of four would need taxable income of more than $40,000 a year to be pushed into the top 27% bracket.

Sen. Daniel Patrick Moynihan (D-N.Y.) said current tax deductions would be retained for state and local income taxes, real estate taxes and personal property taxes. The proposal would eliminate the existing deduction for state sales taxes.

No mention was made of whether home mortgage interest or charitable contributions would be deductible under the new plan. But throughout the week, the committee members said any plan would need to retain such write-offs to be politically acceptable.

Packwood said the plan would cut the top corporate tax rate from 46% to 33%, but would shift about $100 billion of the tax burden from individuals to businesses over five years.