Senate Finance Committee Chairman Bob Packwood (R-Ore.), who once said he liked the federal tax system "the way it is," says he has had a conversion experience.
"I have changed my views totally because of the hearings," Packwood said in an interview, recalling that countless lobbies came before his panel, each defending a particular tax break for businesses or people. "There is no group that does not have a preference in the tax code."
Today, Packwood is pushing a plan to change the tax system so dramatically for individuals -- cutting the top rate from 50 to 26 or 27 percent -- that no American taxpayer would be untouched. While most corporate tax breaks would remain intact, the plan appears to have made the once-dying issue of tax overhaul a live possibility.
"I came around full circle to think that Bradley was right," Packwood said of a proposal by Sen. Bill Bradley (D-N.J.) to wipe out many deductions in exchange for reducing tax rates dramatically. "We ought to get the rates as low as we can, and let economic efficiency guide decisions."
This turnabout in philosophy helps explain an otherwise baffling reversal in the way Packwood is handling President Reagan's No. 1 domestic policy initiative, known as tax reform.
It also is not the first time the volatile chairman has changed course. Packwood's shifts in position are so familiar by now that The Portland Oregonian published a cartoon this week portraying "H&R Packwood with another of my 17 versions of tax reform."
Last July, Packwood said he would kill any tax bill that failed to preserve the favored treatment of timber, his home state's leading industry. He backed off the next day, while vowing to remain a timber advocate. At various other times, he has called for a consumption tax and an energy tax and has stood up for deductions he now wants to repeal.
Until two weeks ago, he was pushing a tax bill laden with breaks for selected groups and industries -- timber included -- saying he believed concessions to special interests would win votes for his package.
Instead, senators asked for more and Packwood couldn't hold them back, which resulted in a bill with so many special write-offs that it threatened to raise the federal deficit as much as $100 billion by 1991. Two weeks ago, Packwood pulled the measure off the table, vowing to return to "square one."
"Square one" was a shocker.
The chairman now seeks to slash the top individual tax rate to 26 or 27 percent -- compared with Reagan's proposal of 35 percent. To make up the difference, he would wipe out such cherished breaks as Individual Retirement Accounts and the favored rate for capital gains and eliminate widely used deductions for medical expenses and certain nonmortgage-interest payments.
The top corporate rate would plunge from 46 to 33 percent, largely through eliminating the $38 billion-a-year investment tax credit, the single biggest business benefit in the Internal Revenue Code. Most other benefits for business would remain, a concession to the political difficulty of curbing them.
The change appears for now to have revived momentum for tax overhaul. Sen. Malcolm Wallop (R-Wyo.), who had no use for the earlier effort, has become an enthusiast. Bradley crooned: "The music of tax reform is finally playing." And Treasury Secretary James A. Baker III portrayed the plan to the committee as "simple, real reform."
But prospects are far from certain. Deductions targeted for repeal touch the vocal and powerful middle-class voter. These deductions now lure investment to numerous industries that have come to depend on them. Virtually every senator wants changes, and Reagan has some major concerns, such as the elimination of the capital gains break, according to a senior administration official.
The plan also shifts considerably less of the tax burden from individuals to corporations than proposals by Reagan or the House-passed legislation. Despite the dramatic rate cut, the average real tax cut for individuals would be much smaller than either of the other proposals.
Another uncertainty is Packwood himself, a doctrinaire independent who has taken on his president as an advocate of abortion rights for women and whose swings of strategy on tax matters have stirred some unease among committee members.
"He's very unpredictable," said a Finance Committee member who insisted on anonymity. "When I think we've worked out an agreement on something, we'll walk down the hall together and into the meeting, and then he will make a speech going in exactly the opposite direction."
Sen. David F. Durenberger (R-Minn.) emphasized that Packwood is in only his second year as chairman and has not cemented relationships with the panel as had his predecessors, Sen. Robert J. Dole (R-Kan.) and Sen. Russell B. Long (D-La.).
"There's a hesitancy on the part of most of us because he's been known to be his own person," Durenberger said. "He's known to be potentially volatile, stubborn. He has not been known as a compromiser and a collegial spirit. So you still ask yourself: What's Bob giving up? He's asking me to give up something. What's he giving up? . . . . "
"Bob Packwood is not about to tell a soul what is going on in his head," Durenberger said. "There isn't a one of us that is an expert on [him]."
Packwood said in the interview that he is unfazed by the criticism he received for his early concessions to special interests (The New Republic dubbed him "Senator Hackwood") and for his leadership style.
"I'm a big boy," said the Oregonian. "I've been in the business a long time . . . . I would hope that there isn't any of us that is so fixed in stone [that] we'd say, I'm never going to change."
Senators and some business leaders appear to be rallying behind Packwood in this last hurrah for tax overhaul. "The fact that he's still plugging away with all these damned ideas is a great tribute to the guy," Durenberger said. He and Sen. John C. Danforth (R-Mo.) said they observed Packwood's "conversion" over the last year and considered it genuine.
"He believed very sincerely that the tax code could be used to accomplish a variety of social and economic objectives, and he now feels that's more dubious," Danforth said.
Dave Franasiak, a lobbyist for the Standard Oil Co., said Packwood's strategic swerves also may short-circuit some special-interest lobbies. "Lobbies have trouble dealing in a chaotic environment. You may need someone who zigs and zags to get this thing through," Franasiak said.
But the false start has used up several weeks, leaving less time for Congress to deal with tax overhaul and still confront the pressing issue of deficit reduction. Lawrence F. O'Brien, an attorney with several clients in favor of tax overhaul, observed:
"The question now is whether this procedure can be brought to a positive conclusion or whether in the end it's too late in the process.