Ryan rips into N.Y., N.J., California over tax loads
WASHINGTON — The top House Republican on Thursday blasted high-tax states that deliver billions to the federal government as he faced a backlash from rankand-file GOP lawmakers over a sweeping tax-cut proposal.
But beyond the tough rhetoric from Speaker Paul Ryan, lawmakers met privately with Republican leaders and reached for possible compromises to break the impasse. The GOP lawmakers from high-tax states oppose the plan’s proposal to repeal the popular federal deduction for state and local taxes. It’s used in large numbers by residents of their states.
Ryan went on the offensive against high-tax states like California, New York and New Jersey even though the GOP lawmakers from those states need to be brought on board to support the tax overhaul plan.
But Ryan contended that the rest of the country is “propping up profligate, big-government states” that levy high taxes on their residents and spend recklessly.
“States that got their act together are paying for states that didn’t,” the Wisconsin lawmaker said at an appearance at the conservative Heritage Foundation.
In fact, California, New York and New Jersey send many billions more in taxes to Washington than they get back in federal spending, new data show. Divided by total state residents, New York gets back 81 cents for every $1 it pays in, New Jersey receives 74 cents and California 96 cents, according to an analysis released last month by the Rockefeller Institute of Government.
New York contributed $48 billion more in taxes to the federal government than it received in government spending — the biggest deficit the analysis found. New Jersey gave $31 billion more in taxes than it got back, and California $17 billion more, the data show. The figures were for the budget year ending Sept. 30, 2015.
The state-local deduction is claimed by around 44 million people and reduces revenue to the government by an estimated $1.3 trillion over 10 years.
“There’s a number of proposals on the table,” said Rep. Tom MacArthur, R-N.J., after a meeting of his colleagues from high-tax states with GOP leaders, including House Majority Whip Steve Scalise, R-La., and Rep. Kevin Brady, R-Texas, head of the tax-writing Ways and Means Committee.
“There’s more than one way to skin this cat,” MacArthur said, but added, “It has to be soon.”
MacArthur and others who attended wouldn’t specify what compromises were being considered short of complete repeal of the deduction. One possibility they were asked about would cap the deduction at a single taxpayer’s annual income of $400,000, or $800,000 for a married couple.
That would affect just the top 1 percent of taxpayers, according to Amir El-Sibaie, an analyst at the Tax Foundation. It could bring in $481 billion in revenue over 10 years, compared with an estimated $1.8 trillion if the deduction were fully repealed, El-Sibaie calculates.
At the White House, Trump’s chief economic adviser, Gary Cohn, discounted a news report Thursday that the president had expressed concerns over the proposed repeal. Asked whether Trump was rethinking the move, Cohn said no.
Some opponents contend that repealing the deductions would subject people to being taxed twice and would amount to a federal revenue grab on the backs of homeowners who pay property taxes.
“There will be a transfer of wealth of over a trillion dollars to the federal coffers,” said Matt Chase, executive director of the National Association of Counties.
Randi Weingarten, president of the American Federation of Teachers, said that eliminating the deduction would not only “devastate funding for public schools, infrastructure, law enforcement and other vital services” but also boost taxes on the middle class. “For what? Tax cuts for the wealthy.”
The White House has argued that the plan is focused on helping middle-class workers, contending that lowering corporate rates will boost jobs while the tax cuts and simpler tax code will reduce their burden.
House Speaker Paul Ryan holds a copy of the proposed “simple tax” postcard Thursday during a speech at the conservative Heritage Foundation in Washington in which he criticized “profligate, big-government states.”