Former Senate Finance Committee Chairman Bob Packwood tells Newsmax that in the wake of the scandal surrounding the IRS' targeting of conservative groups, Congress could enact an entirely new tax code this year.
The Oregon Republican also says the Obama administration should delay implementation of the entire Affordable Care Act and not just the employer mandate.
Story continues below.
Packwood was first elected to the Senate in 1968 and served until 1995. He chaired the Finance Committee from 1985 to 1987 and again in 1995. He also served as chairman of the Committee on Commerce, Science, and Transportation from 1981 to 1985.
He is now a member of the Fix the Debt Congressional Fiscal Leadership Council, a bipartisan group of more than 85 former federal lawmakers from across the country.
Packwood rewrote the tax code in 1986. In an exclusive interview with Newsmax TV, he was asked how he would write the tax code today.
"Here's what I would do to start," he says. "I would eliminate all deductions, everything, no deductions of any kind, and then tax as income everything that is not taxed now, including fringe benefits, municipal bonds.
"You start from zero and then you say, okay, what are the things we have to add back in? Is that the mortgage deduction? Is that charitable gifts? What are the things we have to add in to be able to get the votes to pass it?
"You could probably get a tax rate in the 20s, maybe even 25, on the individual side, but the only way you'll get there is starting from zero. You've got to start from nothing and build up rather than trying to deduct from what is."
Packwood asserts that the tax code should not be used to increase more federal revenue.
"I would rather not have tax reform mixed up with raising money. If we're going to raise money, if you think we need more money, then there are a couple of other steps I'd rather take.
"One would be a value added tax, the other would be a financial transactions tax, a very small, less than one-half of 1 percent tax on all electronic financial transactions. It raises a tremendous amount of money. I'd rather do either of those to raise money than to simply try to raise it through the income tax with the current tax structure."
Some observers say the recent IRS scandal has given momentum to calls for tax code revision. With the bipartisanship of Senate Finance Committee Chairman Max Baucus and House Ways and Means Committee Chairman Dave Camp, we could have a new tax code this year, Packwood maintains.
"The two chairmen are going to have to do it pretty much the way I suggested. Get rid of everything, start with zero, and then see how much lower rates you can get.
"You'd be amazed how many people who think I cannot give up my charitable deduction will be willing to give it up if the rates are low enough to overcome their resistance.
"The two chairmen could do it. Whether they will do it or not I don't know."
President Obama wants to cut the corporate tax rate from 35 percent to 28 percent but apply it to all income, including the foreign profits of U.S. multinationals.
Packwood comments: "You could do it in 1986 on a revenue neutral basis. We lowered the individual income tax from 50 percent to 27 and the corporate tax from 48 to 33 and we're revenue neutral. We didn't raise money, we didn't lose money. You can do it.
"If we're going to talk about foreign taxes, however, we're better off to do what the rest of the world does. That's called a territorial tax. If you make money overseas, you pay whatever tax you owe overseas. When you bring the money home, it's not taxed. Almost every industrial country in the world does that and they're the ones we're competing with, and that's the system we should go for if we're talking about overseas taxation."
The Obama administration last week announced it was delaying implementation of the Affordable Care Act’s employer mandate. Asked if the president should delay the entire law as Senate Republicans have asked, Packwood responds: "In my judgment, he should. In my judgment, I wish we'd get rid of the law.
"But let's face it, we're going to have it, it's not going to be repealed. I'm glad at least it's been put off in some part for a year so the administration can come up with regulations. They're not ready to put it into effect. It's no wonder they put it off for the year."
Packwood also says Congress will have no choice but to raise the debt ceiling again in November.
"You've already voted to spend the money. You've already sold bonds to everybody in America and people overseas," he tells Newsmax.
"What you are going to do? Not raise the debt ceiling? America's never going to do that. So yes, Congress will eventually raise it. There will be some tough negotiating. There will be some tradeoffs. But Congress is not going to let this country not pay its debts."
Packwood also says he would have "no difficulty at all" supporting the Senate's immigration reform bill, which the House will not take up.
"It was a good deal," he says. "I would've gone even further than they went but I would've voted for it in the Senate.
"I wish rather than the House initially just saying we're going to reject it, they had said nothing. It was a political mistake to just reject it out of hand."
He adds that "if we pass no immigration bill, it will hurt Republicans. But if it's passed, will the immigrant voters suddenly swarm to the Republican Party? I don't think this will be enough.
"We have spent 20 years poisoning the waters for immigrants and I don't think one bill, even if we help pass it, will make an overwhelming difference initially. To win back voters that you've lost is not a one-election prospect. It's a 10-year prospect. It's a 20-year prospect. And you have to work at it."
© 2015 Newsmax. All rights reserved.