Q. What do you think of the tax plan proposed by (Senate Finance Committee Chairman) Bob Packwood (R-Ore.)? One of the principal features of that proposal would repeal the tax deduction companies take for excise taxes and tariffs they pay.
A. It is going to put a 50 percent increased cost of the excise taxes on business, and they're going to pass them along. I honestly think that to take this and make it nondeductible is a totally indefensible thing, finding a legitimate business expense and saying, "We just aren't going to let you deduct that," makes no sense whatsoever. It's just a means to get around the prohibition against raising taxes.
Q. What would it do to your company?
A. We would not be able to deduct the excise taxes on our fleet of about 10,000 vehicles, and presumably the cost of our transportation would go up. But my guess is the nondeductibility of the excise tax on gasoline is more than offset by the reduction in the corporate rate from 46 percent to 35 percent so that, on balance, the Packwood bill would be favorable to us as a company, and for a large part of the grocery-manufacturing industry, the Packwood bill would be favorable.
It has a lot of things that go to our objectives, and if it is the best we can do, we might decide to be very supportive of it. It's just kind of disappointing, a vehicle to maintain a lot of the tax preferences. It is a means of accomplishing the thing without following the spirit of tax reform at all. I don't blame the senators: They've got to look after their constituents as they see it. I just kind of hope President Reagan won't allow the consumption tax to go in there to pay for all of it.
Q. Does it seem that the industries that would pay higher taxes in the Packwood plan are the ones that have tended to be for the House bill?
A. The Packwood proposal is an attempt to keep low-tax-paying companies not paying taxes, to keep the preferences in. All the natural-resource preferences are left in place, accelerated depreciation is higher than the House bill and then he invented another thing where General Electric is going to be able to claim 70 cents on the dollar for all the unused tax credits. They need the subsidy, I guess.
Q. Do you think that's a conscious attempt on Packwood's part to peel off the companies that are for tax reform?
A. There are two theories. One is that the Finance Committee is largely beholden to companies and industries that have made a great investment in those members over the years and they must be responsive. The Senate has, with the exception of two or three members, been totally indisposed to tax reform.
There is the other theory that they are using these techniques to get the pro-tax-reform groups to turn anti-tax-reform. Then when they have us all against tax reform, they'll throw up their hands and say, "Let's call it quits." That just isn't going to happen. We are going to be supportive of tax reform all the way, whether or not we support Sen. Packwood's bill.
Q. How did you get interested in tax reform?
A. I really got interested because I read about Treasury I, the "pure" tax-revision proposal released in November 1984 . I read it and I marveled at it. It was the first time anyone sat back and said, "How should we do this? What are the principles we should follow in setting tax policy in America?" I thought it made a lot of sense, particularly in the context of this increasing politicization of tax policy that exists uniquely in America. There is no other place in the world where people can go to their legislators and give them enormous sums of money and say, "By the way, I need a tax break" -- and get it. We've got $120 billion of those tax breaks today.
Q. Does it go back farther than that?
A. My father happened to not mind paying taxes. He really thought people should do that and they shouldn't spend any time in tax avoidance. He always chastised anybody that tried to. I just never did like tax shelters. The whole principle of them didn't make much sense, the idea of trying to lose money. And at the tim, our corporation had just been through safe-harbor leasing a tax break that, until it was repealed, let firms "sell" their tax breaks, even if they were not profitable and I thought that was just awful.
Q. It helped your bottom line, right?
A. A little. It drove our tax rate down substantially but, you see, you have to buy the right not to pay taxes, so we bought airplanes and tooling plants and that sort of thing. I was offended by it, but I decided years ago you don't just sit around and be offended by that, you do take advantage of what's there, but you don't have to believe it's the right public policy.
Q. You can argue it's inconsistent to take advantage of something and criticize it at that same time.
A. I don't think so at all. I can very well criticize something because I think that, as a matter of public policy in the country, they ought not to be giving accelerated depreciation. I'm not going to fail to depreciate on the accelerated method or take an investment tax credit because I don't believe in investment tax credits.
Q. What is your lobbying strategy in the Senate?
A. It has been to recognize that, until recently, the Senate never really saw a pro-tax-reform person. They are so attuned to that lobby that has been working on them for so many years that some way we've got to let them know there is within business a strong body in favor. With the Senate, you can be more rifle-shot, working directly with the Senate Finance Committee. They are beginning to hear from those of us that favor tax reform. Of course, we'll continue conducting grass roots efforts and mailings and cards.
Q. Why do some companies spend a lot of time seeking tax breaks and other favors from Washington and others don't?
A. It is the best return on investment you can get. If you have a Washington office and those people are down there and they get a tax code that helps you a great deal, then you are spending a few million dollars a year for a Washington office and those people can show you they saved you hundreds of million of dollars. They have an interest in building their little empires. They say, "Look, there is no investment that can be more profitable than saving taxes, when you think about it." It's an after-tax return by definition if you're saving taxes, and the money you're spending is tax-deductible.
Q. Why doesn't everybody do it?
A. Some do it because they have had a lot of regulatory relationships with Washington and they are very adept at it. Some have done it because they have been in real trouble from time to time and they are accustomed to lobbying on trade issues, for example, trade laws and tariffs. Then there are industries that really just have not.
The oil industry is an example of one that has had the windfall-profits tax put on them, so they certainly g ared up. They have been protecting [deductions for] depletion allowances and intangible drilling for years and years. Look who has the PACs political action committees . It's those who do business with the government: the defense contractors, the utilities who are regulated by the government, it's the exporters who have tariffs to deal with, industries who have been in trouble and wanted to be bailed out . . .
Q. What's really at stake for business in this battle? Is there a larger image question or societal question in this debate over tax reform?
A. If there is, it is [the role of] the lobbyists and the PACS. They have been growing, and sometime someone's got to address that issue. If you continue to get rewards out of the expenditures and victories to the special-interest lobby, then they are only going to get bigger. When you look at the amount of money, you get these congressmen so neutralized, they don't have a chance to operate.
Q. Yet you also are trying to influence Congress in a way that will be to your company's advantage.
A. I promise you that that's not what's driving me. It's just that I couldn't do it otherwise, if I wasn't sure it's to our advantage. . . . I don't like the way the system works, and I think that's important.