Senate Finance Committee Chairman Bob Packwood (R-Ore.), facing certain defeat on crucial votes, postponed further action on tax-revision legislation yesterday, saying that "it would be the end of the bill" if his proposals failed.
The surprise move left the tax-overhaul effort -- President Reagan's No. 1 domestic policy initiative this year -- in limbo. Packwood said he hopes to resume committee meetings next week but will cancel the scheduled drafting sessions if necessary to negotiate a private compromise with members.
Over the last few weeks, the committee has voted to preserve tax advantages for such interests as timber, oil, federal workers and local governments. Together, those votes have left the bill $29 billion short of its goal of being revenue neutral, illustrating the difficulty of reducing tax rates without worsening the budget deficit.
Votes had been scheduled on such big-ticket provisions as a limit on the deductibility of state and local income taxes for upper-income taxpayers, repeal of the sales-tax deduction for everyone, and a limit on the deduction for business meals. Senators sponsoring amendments to reject those proposals said they had 11 solid votes on the 20-member panel, more than enough to win. This would leave the package more than $50 billion in deficit over five years.
"The way we're going, if these votes are thrown away today, we've thrown away any chance of tax reform at all," Packwood said.
Packwood said he decided to withdraw the legislation early yesterday morning, after phone calls to committee members indicated that he would lose the key votes scheduled for the day.
White House spokesman Larry Speakes reacted by saying, "We think it's still important that we have tax reform." But there waslittle indication that Reagan -- who leaves for a 13-day trip Friday -- plans to push for tax overhaul at this point.
Packwood said the next step probably is to start cutting deals in private.
"When we go into a room with no windows and no doors and don't allow any exits for 12 or 14 hours, we'll come to all kinds of conclusions we wouldn't consider before," he said.
Senate Majority Leader Robert J. Dole (R-Kan.) also predicted that the committee will produce a tax bill and promised to attend more committee meetings and give Packwood more support. Dole, a former Finance Committee chairman, has been careful not to steal the limelight from Packwood, but has vowed to help the president push a bill through the Senate.
Other Finance Committee members agreed that private meetings might produce legislation and pointed out that the House Ways and Means Committee went through the doldrums before producing the sweeping tax bill that passed the House last December. Packwood, they said, is under pressure to show he can match the record of Ways and Means Chairman Dan Rostenkowski (D-Ill.), who steered a tax bill through his panel in closed session.
But interviews with Finance Committee members indicate the tax package may face such serious opposition that its resurrection is doubtful.
Opposition is not limited to the committee.
A nonbinding resolution sponsored by Sens. Rudy Boschwitz (R-Minn.) and Steve Symms (R-Idaho), calling for postponing consideration of tax overhaul until Congress and the White House agree on a budget for fiscal 1987, passed the Senate last week, 72 to 24.
"What we're going through is an exercise pretending we're reacting to a public demand that frankly is not there," said Sen. David H. Pryor (D-Ark.). Gesturing at the lobbyists packing the back of the committee room, he said, "The only demand we ever have any contact with is all these people sitting here and in the hall . . . . That's the only demand we're hearing: Don't tax us."
Packwood's initial mistake, senators suggested, might have been to exempt such favored Oregon industries as timber from any of the crackdowns in his original plan. Packwood also has voted for other proposals indirectly favorable to timber, such as tax advantages for homebuilders.
Oil and gas, another industry with strong representation on the panel, also was not squeezed by the original proposal. Manufacturers and assorted other industries benefitted from a new system for writing off investments. And Packwood's pet interest, tax-free fringe benefits, was left unscathed.
"It was obvious from the beginning Bob Packwood had taken a position, for example, on [not taxing] fringe benefits. Clearly, that set each of us up with the right to protect something," said Sen. David F. Durenberger (R-Minn.). "There isn't anything wrong with that if you can get enough money in other places, but it becomes a problem when there is no other tax principle involved in the process."
Although markup sessions have been suspended, the Finance Committee has scheduled a public hearing Monday on Packwood proposals that would repeal the deduction companies take for the excise taxes they pay and would raise excise taxes on gasoline, alcohol and tobacco.
Those proposals, which would raise about $75 billion over five years, face strong opposition on the committee and among industry and consumer groups.
If they are rejected, as is likely, Packwood will be looking for more than $100 billion in revenue to keep his plan "revenue neutral."
Sen. Bill Bradley (D-N.J.) suggested that some of the money could come from reducing tax rates less than Reagan wants, tightening investment writeoffs and "a wholesale revisiting of the indulgences that we have engaged in in the last weeks."