Fallen senator takes on 'death tax.' - Bob Packwood lobbies against estate taxes - Cover Story - Interview

Progressive, The, August, 1997 by Ruth Conniff

Bob Packwood is back. Less than two years after he resigned his Senate seat in disgrace, dogged by sexual-harassment charges, the former Republican Senator from Oregon has set up shop as a lobbyist in Washington, D.C. From a small basement office on Wisconsin Avenue, Packwood is lobbying his former colleagues on Capitol Hill to abolish the federal estate tax.

Sunrise Research Group, Packwood's firm, is a one-room operation downstairs from a dry-cleaners, in a four-story building surrounded by restaurants and shops. The office is crammed with books from Packwood's personal library, including limited editions of Huckleberry Finn and the Life of Abraham Lincoln, and with personal memorabilia -- pictures of Packwood with Presidents Nixon and Bush, squash trophies, a "Dear Bob" letter from Ronald Reagan.

Packwood sits at a desk facing the door, under a portrait of Winston Churchill. His secretary sits at a desk next to him. She offers me some instant coffee, which she produces from a file-cabinet drawer, and directs me to a faded couch in the middle of the room.

In 1995, Packwood became a national laughingstock. Comedians and columnists from coast to coast mocked him for making startling and seemingly indiscriminate sexual advances on the women he worked with. They dubbed him "the Tongue," and pillaged his now-famous, federally subpoenaed diaries for material (The Washington Post actually serialized the juiciest parts). He's making his comeback in Washington championing tax breaks for people who have more than $600,000 to leave to their children -- a cause that seems almost obscene in this era of budget-balancing and belt-tightening for the poor. It doesn't sound like a political winner.

But Packwood is plugging away. "I'm working on the Senate side -- my real friends are in the Senate," he says. "They've been very generous in having me back, and letting me in to see them."

And, he says, he's confident his cause will prevail.

"I think within three Congresses, the estate tax will be repealed," Packwood says. "You can smell the momentum."

The former chairman of the Senate Finance Committee. Packwood helped draft the last major overhaul of federal tax law in 1986. He knows his issue cold. And he clearly enjoys talking about it.

"Back up a minute. What was the purpose of the estate tax when it was established in 1916?" he asks, rocking in his chair. "First, it was to redistribute wealth -- take money from the rich and give it to the poor. Well, if you took the small amount of money raised by estate taxes and gave it to the poor, it wouldn't do much good. It doesn't raise enough money for redistribution."

As it happens, total annual revenue from the estate tax -- about $17 billion, or 1 percent of the federal budget -- just about equals the size of the federal AFDC program.

"Secondly," says Packwood, "the estate tax was intended to break up the concentration of wealth. Back then, we were thinking of people like the Rockefellers and the Jay Goulds. But very wealthy people know how to plan a chili's estate from the time they're one year old. They know you can give away $10,000 a year tax-free. The problem comes with the woman who starts her own business at age thirty-five. She's not liquid enough to give away $10,000." Small-business people can't keep the business in the family because of estate taxes, Packwood argues. Their children end up selling the family farm or the store, just to cover the tax bill. "And who is it sold to? It's not usually another family business. It's a big conglomerate, which is another form of concentration of wealth."

There is some truth to this. Family farms and small businesses can be hit hard by estate taxes. But the majority of them are exempt from the tax, which only affects estates worth more than $600,000. (Currently, the estate tax takes 37 percent of every dollar in assets over $600,000 and moves up a scale, topping off at 55 percent of assets worth $3 million or more.) Only one-half of 1 percent of estate-tax payers are family farmers. Taken together, closely held family businesses and farms make up fewer than 7 percent of taxable estates, says the Joint Committee on Taxation.

Under current law, small, family-owned businesses are already eligible for some special treatment, including deferring their payments on estate taxes for up to fourteen years. There are various proposals floating around Congress that would target further relief to family farms and businesses. There appears to be bipartisan agreement on a plan to raise the exemption from taxes on estates worth $600,000 to about $1 million. But Packwood and his clients are for total repeal -- which would mainly benefit the very rich.

Packwood is close to the vest about his clientele. "I'm going to keep that to myself." he says, when I ask how many clients he has. His lobbyist registration form lists only one client -- a coalition called American Business Is Local Enterprise. Members are "mostly natural-resource-based industry," he says -- in particular, family-owned lumberyards. What are they worth? "I haven't bothered to ask," says Packwood. "None. to the best of my knowledge, reach stratospheric values. But I can't imagine they're worth less than ten or fifteen million. . . . A lumberyard isn't an operation you just start up with a few thousand dollars of capital."