Ryan rips high-tax states amid talks about re­form

Richmond Times-Dispatch - - NATION & WORLD -

WASH­ING­TON — The top House Repub­li­can on Thurs­day blasted high-tax states that de­liver bil­lions to the fed­eral gov­ern­ment as he faced a back­lash from rank-and-file GOP law­mak­ers over a sweep­ing pro­posal to cut taxes.

But be­yond the tough rhetoric from Speaker Paul Ryan of Wis­con­sin, dis­grun­tled 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.

With Repub­li­cans splin­tered, the fu­ture of the $6 tril­lion tax over­haul plan is threat­ened by the GOP de­fec­tions. The suc­cess of the pack­age is a po­lit­i­cal im­per­a­tive for Repub­li­cans who have pinned their hopes on a big leg­isla­tive achieve­ment to help them re­tain con­trol of Congress in next year’s elec­tions. It’s also Pres­i­dent Don­ald Trump’s high­est leg­isla­tive pri­or­ity.

Ryan tar­geted 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. He con­tended 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,” Ryan said 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 res­i­dents, New York gets back 81 cents for ev­ery $1 it pays in, New Jersey re­ceives House Speaker Paul Ryan, R-Wis., held a pro­posed “sim­ple tax” post­card dur­ing a speech Thurs­day.

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 that ended Sept. 30, 2015.

The state-and-lo­cal de­duc­tion is claimed by about 44 million peo­ple and costs the gov­ern­ment an es­ti­mated $1.3 tril­lion in lost rev­enue over 10 years.

“There’s a num­ber of pro­pos­als on the ta­ble,” said Rep. Tom MacArthur, R-N.J., emerg­ing from the 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 taxwrit­ing Ways and Means Com­mit­tee.

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 ($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 busi­ness-friendly 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 cal­cu­lated.

Op­po­si­tion to end­ing the de­duc­tion has pro­duced an un­usual al­liance of the Repub­li­can law­mak­ers from high-tax, Demo­cratic-lean­ing states; state and lo­cal gov­ern­ment of­fi­cials; pub­lic em­ployee la­bor unions; and busi­ness groups like Real­tors. Wary of the pinch their con­stituents and mem­bers could sus­tain from los­ing the de­duc­tion, they are press­ing the Trump ad­min­is­tra­tion to re­con­sider.

“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 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.

The White House has ar­gued that the plan is fo­cused on help­ing mid­dle­class work­ers.


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