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Tax Reform's Split Personality


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TAX REFORM'S SPLIT PERSONALITY

Tax cuts are at the top of Capitol Hill's agenda, thanks to the tidal wave that swept Republicans into control. Representative Bill Archer of Texas and Senator Bob Packwood of Oregon, the new chairmen of the revenue committees, must make GOP promises of massive tax relief a reality. Two more different characters would be hard to find. Archer is an anti-tax conservative who passionately believes in less government. Packwood is more moderate on social issues, less ideological about taxes. The two, says a GOP aide, are the "Dr. Jekyll and Mr. Hyde of taxes."

BILL ARCHER: He would love to scrap the income tax

The tax system, says Houstonian Bill Archer, incoming chairman of the House Ways & Means Committee, is "an abomination." Displaying a courteous but steely demeanor that reflects his past as a Southern banker, Archer preaches: "The less we tax people, the more we let them keep money in their own pockets, the better country we are going to have." Archer, 66, is unwavering. Observes Kenneth J. Kies, a former top GOP tax lawyer for Ways & Means: "In a way, he's like Ronald Reagan. If you asked him the same question 20 years ago, you'd get the same answer."

The lawmaker who replaced George Bush in Congress 24 years ago would love nothing more than to scrap the income tax. And Archer hopes to start in the new Congress: "It would be very appropriate to take a long look at alternatives to the current tax structure."

The Texan may tangle with deficit hawks, however. Archer insists that tax cuts be offset by domestic-spending cuts, not by curbing other tax breaks. And he has one budgetary sacred cow: "I will strongly oppose any cuts in Medicare to pay for the promises in the GOP Contract With America," he vows.

Archer has always gone his own way. He completes his own tax returns. He runs one of the leanest staffs in Congress--and plans to slash the panel's staff. And he refuses money from political action committees--perhaps an easy choice since he regularly runs unopposed. That's in stark contrast to Packwood and former Ways & Means boss Dan Rostenkowski (D-Ill.), both voracious fund-raisers.

Archer differs from Rosty in other ways, too. Although he is unfailingly polite to both Democrats and Republicans, he's no backslapper. His relationship with Treasury Secretary Lloyd M. Bentsen is said by friends to be cordial, not close, though they've known each other for more than 20 years. "Archer's always been an enigma," says a fellow Texas Republican. "He travels off the beaten path of Washington politics."

And though Archer's outlook is strongly probusiness, he's a source of frustration to lobbyists and their clients. "He's a nightmare," says one rep. "He hasn't been doing a lot of favors over the years." Another adds: "He has no problem saying, `I can't help."'

When it comes to tax cuts, the Texan is closely in tune with the new GOP House leadership, and he'll have a strong majority of antitaxers on his panel. Indeed, the tax provisions of the GOP Contract came straight from his own playbook: tax cuts for capital gains and business investment, new breaks for married couples and families with children, and an easing of estate taxes.

Archer will enjoy a relatively free hand in developing a tax bill this year. Tax experts wonder, though, whether he'll be flexible enough to develop a bipartisan consensus on revenue bills. "He is very rigid in his views," says one Ways & Means Committee Democrat. "There's never a deal with Archer."

Yet, under extremely trying circumstances, Archer has succeeded in cobbling together majorities. In 1989, in the face of overwhelming opposition of the House Democratic leadership, he lobbied colleagues until he won the Ways & Means committee's support for a capital-gains cut--and pushed it through the House. "It was a remarkable job," says former GOP Representative Bill Frenzel of Minnesota.

While Archer has spent much of his time focusing on Texas tax issues such as breaks for oil producers, capital gains is closest to his heart. Sometime next spring, the patient Texan should finally bring his dream to fruition, the first step in a lifelong ambition to slash taxes.

BOB PACKWOOD: Will he undo the tax-reform act?

At 62, Bob Packwood has neither the manner of a banker nor the vision of an ideologue. He's rumpled and volatile and unpredictable--at least as far as taxes are concerned.

The Oregonian, who chaired the Finance Committee in 1984-86, will use his reclaimed post to put his stamp on several nontax measures: a welfare overhaul, health reform, and trade. But he is circumspect about his tax agenda.

Packwood declined to discuss his ideas, despite repeated calls from BUSINESS WEEK. That may stem partly from his realization that what remains of the 1986 Tax Reform Act--perhaps his greatest legislative achievement--is endangered. The '86 law hinged on a grand bargain: Income tax rates were slashed, but tax breaks were curbed. Congressional Republicans want to restore many of those breaks. "What Archer is proposing is in many ways a full repeal," says Deloitte & Touche tax analyst Clint Stretch.

Packwood will also have to forge consensus on his own diverse committee. While Archer's ideas enjoy support, Packwood will have to broker between two GOP Presidential contenders--incoming Majority Leader Bob Dole (R-Kan.), who is already a member, and Senate powerhouse Phil Gramm (R-Tex.), who wants to join the panel. Each has very strong views. "He'll have to operate under some tough constraints," says one tax lobbyist.

Handling that challenge takes the skills of a diplomat--a role ill-suited to Packwood's personality. Colleagues call him a man of independence, enormous tenacity, and a deep mercurial streak.

Before 1986, Packwood was known as a social liberal who was pro-choice on abortion. His tax agenda was limited to protecting incentives for home-state timber interests and backing tax breaks for employee fringe benefits--another popular issue in pro-union Oregon. In 1985, he said, "I sort of like the tax code the way it is."

Late that year, the House-passed version of tax reform was dumped on Packwood's reluctant committee. Against all odds, he muscled the massive rewrite through the panel. "I don't think he ever believed a word of it, but he just decided he was going to get it done," says a lawmaker involved in the process.

LONG-RUNNING SCANDAL. Packwood's career also has been marred by controversy. In 1982, after five successful years as chief fund-raiser for Senate Republicans, he was booted from the post for charging that then-President Ronald Reagan was hurting the party by ignoring African Americans and women. More seriously, Packwood in 1992-93 was hit with allegations of sexual harassment by two dozen women. The charges are the subject an ongoing investigation by the Senate Ethics Committee. Many senators, including Republicans, have called for his resignation. Packwood not only hung on to his job but he has gained new power. Says a GOP colleague: "There was a point at which publicity about his personal life was so intense he couldn't do anything. But he just kept fighting."

With the Republicans in charge, the worst of the scandal is behind him. Packwood now has to decide what to do with his restored clout. He has shown interest in replacing the current code with a consumption-based tax. But first he'll have to decide whether he's prepared to demolish the tax-reform act that is a monument to his first go-round as Finance chairman. Two Chairmen,Two Agendas

ARCHER'S VIEWS

TAX REFORM: Wants to repla

CAPITAL GAINS: Backs a cut, and will win passage

OIL AND GAS DRILLING: Strongly supports incentives for energy producers, but Clinton may resist

INHERITANCE TAXES: Prefers repeal of estate tax, but will settle for a jump in the tax-exempt portion

PACKWOOD'S VIEWS

TAX REFORM: Favors an investment-slanted code, but gives no specifics

HEALTH CARE: Will push for modest reform, though he must win over reluctant Republicans

TRADE: Backs free trade and GATT; will support future trade deals

WELFARE: Will develop a consensus reform plan with Senator Daniel P. Moynihan, the Finance panel's top Democrat

DATA: BUSINESS WEEK

Howard Gleckman in Washington and Richard S. Dunham in Houston


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