The Senate Finance Committee began the long process of writing its tax-revision proposal yesterday and immediately confronted strong opposition to a key provision involving excise taxes put forward by Chairman Bob Packwood (R-Ore.).
During the committee's first official drafting session, one senator after another criticized doing away with the deduction companies take for the excise taxes and tariffs they pay, contending that such a change would raise the price of such goods as alcoholic beverages and gasoline.
"The proposal we have before us could very well increase the tax burden on low- and middle-income Americans," said Sen. Bill Bradley (D-N.J.). "Why? So we can preserve a few corporate loopholes."
"It's not going to happen," said Sen. Daniel Patrick Moynihan (D-N.Y.).
Removing the excise-tax and tariff deduction would raise $62 billion over five years, money that is needed to offset the revenue that would be lost by the plan's tax rate reductions.
Packwood said he is willing to compromise if members can find other ways of raising revenue needed to keep the bill from increasing the federal deficit. But he cautioned that preserving tax breaks important to senators -- his plan, unlike the House bill, would keep current tax treatment for timber, oil and gas -- will be difficult without massive infusions of new revenue.
"The things we did for capital formation and for savings and investment were expensive items," Packwood said. The excise-tax provision "is the engine that makes the rest of the bill possible. Without that revenue or an immense equivalent source of revenue, the things that I tried to do in the draft cannot be done."
The committee, which will meet again Monday, took no action toward drafting a tax-revision bill. But 18 of the panel's 20 members signed a letter promising not to agree to a compromise with the House unless the dates the legislation would become effective are similar in both the Senate and House bills.
Most of the tax law changes in the House bill would be retroactive to Jan. 1 of this year, which has left the business and financial communities confused about the tax consequences of their decisions. The Packwood plan proposes a general effective date of Jan. 1, 1987, although the rate cuts in both plans would kick in six months after most of the rest of the package.
House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) has promised that the effective dates for changes involving tax-exempt government bonds can be extended. But he has expressed no interest in a broader postponement.
Packwood did not sign the letter but he spoke forcefully in favor of prospective dates, calling them "not negotiable," and said he would not compromise too much just to pass a bill that could be called "tax reform."
"Half a loaf in this case is not okay," Packwood said. "Half of that House bill would be an abomination. I, for one, would have no hesitancy about walking away in conference from any bill rather than having any bill for the sake of a bill."
Treasury Secretary James A. Baker III said Packwood's plan meets the president's goals, adding that it "is a package that hopefully will put us on the road to a tax code that will encourage economic growth and. . . greater fairness."
Packwood has said President Reagan supports his proposal, but White House chief of staff Donald T. Regan said Sunday that Reagan would not sign it in its current form. Packwood aides said that Baker had assured Packwood that the administration endorsed his plan.