President Clinton and Congress are chattering about taxes, mostly grandiose claims about cutting them and still balancing the budget.
Confused, I turned to a capital ghost.
The ghost knows the tax code as well as anyone. But because he was forced to leave a prestigious lair 18 months ago, I had to find a non-descript five-story building in a pub-crawling, commercial section of upper Georgetown and enter a 600-or-so-square-foot basement office.
“There are several myths about the tax system,” Robert Packwood said.
“The first is that you can solve our problems by taxing the rich. There are not enough rich.
You could confiscate all the rich people’s income, and it would not solve our (budget deficit) problem. There are simply not enough people of wealth.
“We could not even solve our annual budget deficit problem if we confiscated the income of all of those earning $200,000 and above. Took it all. Taxed it at a rate of 100 percent.”
Hmmm. Hey, is that the same Robert Packwood, the Oregon senator who . . . ?
“The second myth is if we just quit spending money on foreign aid, we’d solve our problem. Only about 1 percent of the budget goes for foreign aid. But it is hard for a politician, especially when he’s in a town with 8 percent or 9 percent unemployment, to answer questions about why money is going to a foreign country.”
The same Packwood who . . . ?
“The third myth involves Social Security, and that `all I get back is what I paid in.’ The system is a basic pyramid club with people still working at the bottom paying for those retired at the top.”
Yes. This was the same man who fell from grace and left the Senate in late 1995 amid allegations of sexual harassment and the public airing of weird personal diaries.
Divorced, hollow-eyed, thin, Packwood remains an intellectually curious loner. One of the twists of his fall is that former staffers, many of them women, remain loyal.
Light jazz was playing when I dropped by Sunrise Research, a lobbying and consulting enterprise he has started with just a single assistant.
While his ignominious exit may be the public’s most vivid association, legislative insiders know him from a different perspective. He was among the last of a species, the moderate Rockefeller Republican. And, importantly, he was chairman of the powerful Senate Finance Committee, seat of tax legislation, where he enjoyed the respect of colleagues.
Packwood’s credentials are underscored by one of the few mementos on his walls: a 1986 letter from President Ronald Reagan congratulating him on passage of the Tax Reform Act of 1986.
It is his most impressive achievement. It cut the number of tax rates from 13 to three, shifted more than $100 billion in tax liabilities from individuals to corporations, eliminated 6 million low-income Americans from the tax rolls and closed scores of tax loopholes.
Relative to the incremental actions that dominate the life of Congress, this was radical.
It came after the Democratic-run House, with then-Ways and Means Committee Chairman Dan Rostenkowski of Chicago in the forefront, sent its version of a reform bill to the Senate.
With a committee staffer in tow, Packwood wound up at a low-rent Irish bar on Capitol Hill. Over pitchers of beer, they concluded that the House version was too meek.
Packwood, who had taken criticism for being too cozy to special interests, made a dramatic turnaround. He decided to confront the armies of major league lobbyists who protect the status quo.
It worked. Rostenkowski and Packwood later crafted a final version in a late-night session that didn’t finish until 2 a.m. Within hours, the odd couple found themselves on the Capitol steps with a famous photographer, Neil Leifer, posing for the cover of Time magazine.
After taking a bunch of shots, recalls a Rostenkowski associate, Leifer thought he had the two sufficiently buttered up for a final request: Raise their hands and jump in the air in supposed joy.
While Packwood’s inclination might have been to ask, “How high?” the Chicagoan thought the notion nuts. According to a former aide, he stalked off, declaring, “He (the photographer) must think this is a f—— Toyota commercial!”
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None of the photos made the next week’s cover. But the tax overhaul was historic and may help explain why Packwood still can say, “I have all the clients I can handle,” mostly on tax and trade matters.
At the same time, he’s part of a new group, the Family Business Estate Tax Coalition, which seeks to reduce the huge federal estate tax bite.
You work hard, save, then die. Your survivors “get hit with a bigger tax (55 percent for estates of more than $3 million) than anything you ever paid,” Packwood said. “It’s unfair that there’s a death tax levied on what you saved. It’s a perverse tax,” which accounts for about 1 percent of federal revenues, something around $17 billion a year.
At the moment, however, the competing tax plans of President Clinton and the GOP are a roughly similar mix of a child credit, some capital gains reductions and a tinkering with IRAs.
Packwood thinks the child credit is a misunderstood, flawed idea. It would be too costly and make balancing the budget difficult. Regardless, he doesn’t really think you will see much tax change for several reasons.
For starters, the majority Republicans aren’t likely to do much different from what Clinton is proposing on Medicare, scared of getting burned again by being derided (and cynically so by Clinton) as meanies toward seniors.
Further, despite the obvious need to alter the consumer price index, on which hikes in benefits are calculated, change will likely not happen. That’s precisely because the CPI, as constituted, is said by experts to exaggerate inflation. Packwood agrees.
To change how the CPI is calculated and conclude that inflation is lower would reduce cost-of-living escalators in benefits. Further, it would raise taxes because the tax system is indexed automatically to inflation as measured by the CPI.
If you’re a politician, with senior citizens and unions rallying against a CPI change, that’s too hot to handle.
Personally, Packwood would opt for a flat tax. Cut out all deductions and exemptions, except perhaps a family deduction of maybe $30,000 for a family of four.
With such a family deduction, you could have a flat rate of just under 20 percent. Do away with even that deduction, and you could have a flat rate of 12 percent, he says.
Will his views receive an audience?
I wonder to myself if it’s painfully fitting that Packwood’s office is housed in the same building as the embassy of the People’s Republic of Bangladesh. It’s a nation in which Americans have scant interest.
This is a town with a large population of political ghosts. You see them around. Not long ago, they had tremendous power and then, for some reason or another, lost it.
“It has not been difficult for me,” Packwood insists. “If you keep your balance once you’re there (in power), you know you get the fawning adoration because you are there.”
“I miss the camaraderie of my staff. We were close. I miss the immediate access to facts because of one’s position.”
Packwood, 64, showed me an article that maintained that “among Washington power brokers, hardly a thought is given to the shadow under which Mr. Packwood left the Senate.”
Perhaps.
In a status-obsessed town, losing it can bring a conspicuous fall from grace. It often seems inevitable.
Like death. And taxes.