Senate Finance Committee Chairman Robert Packwood (R-Ore.) launched a sharp attack against another provision of President Reagan's proposed tax revision yesterday, raising new questions about how committed he is to moving a tax package through the Senate.
During a committee hearing, Packwood vowed to protect special tax treatment for the timber industry, even at the cost of preventing enactment of any tax bill. The Reagan administration's plan would tax income from timber sales at regular tax rates, rather than the lower effective rate the industry now enjoys.
"This isn't tax reform," Packwood said. "It's the deliberate act of sabotaging an entire industry and thereby the state of Oregon." Packwood said that if he cannot get the timber provisions removed from the plan, "I will do everything possible to kill the entire bill."
Packwood's statement was the most recent of several he has made expressing opposition to provisions of the Reagan plan. He also has objected to termination of the "marriage penalty" deduction for two-earner couples, conversion of the credit for child-care expenses into a deduction and ending the charitable-contribution deduction for taxpayers who don't itemize their deductions.
Packwood, a strong supporter of tax-exempt employe fringe benefits, also has said tax revision would "unravel" if the bill taxes health insurance premiums paid by companies on behalf of their workers at levels higher than those suggested by the Reagan plan. The Reagan plan proposes taxing the first $10 per month paid by an employer for an individual's health insurance and the first $25 per month paid for families.
The Oregon senator also has said he is interested in several drastic tax changes that are not part of the Reagan proposal. For example, he likes the idea of a tax on consumption. He has informally proposed an excise tax on imported oil as a way of lessening U.S. dependence on foreign energy sources, and he has raised the possibility of reducing the top income tax rate to as low as 25 percent.
The top rate now is 50 percent, and Treasury Secretary James A. Baker III has said that cutting that rate any lower than the 35 percent proposed in the administration plan would tilt the benefits of the proposal too much toward well-off taxpayers.
Early in the tax-revision debate, Packwood also said, "I sort of like the tax code the way it is."
A Packwood spokeswoman said the senator is strongly in favor of the principles of tax restructuring, including fairness and simplicity, and stands by his commitment to try to pass a tax bill in the Senate by Christmas if the House can enact legislation by Oct. 15 -- a deadline House tax writers consider rather optimistic.
Meanwhile, a few members of the House Ways and Means Committee indicated yesterday that some taxation of fringe benefits may be a necessary part of tax revision.
In addition to taxing part of employer contributions to health insurance premiums, the Reagan plan would cap the amount that can be contributed to tax-deferred savings plans, called 401(k) programs. It also would set complex new requirements to ensure that all of a company's workers can participate in benefit and retirement plans.
These changes generally are opposed by both business and labor, and representatives of companies that offer benefit plans told the Ways and Means hearings that the proposals are too complicated, would limit a company's flexibility in offering some kinds of savings and retirement programs and would raise their costs.
However, Rep. J. J. (Jake) Pickle (D-Tex.), noting that employe benefits had risen to 36 percent of payroll, said, "That's an erosion of the tax code. Somewhere, we've got to decide what is good tax policy."
Committee Chairman Dan Rostenkowski (D-Ill.) asked the witnesses where tax revenue could be raised to offset the loss from lower tax rates, if the benefit provisions were removed from the plan.
"How do we ask the American people, if we're going to get your rates down . . . are you willing to suffer a little pain?" Rostenkowski asked. "That's the problem of the committee."
Robert S. Stone, senior corporate counsel for IBM Corp., responded that many of the benefits that have increased as a share of payroll are not tax-free, and that the provisions concerning benefits do not raise much federal revenue. According to Treasury Department figures, all the health and retirement benefit changes proposed by the Reagan administration taken together would raise $8.7 billion by 1990.