Repub­li­can law­mak­ers balk at tax cut pro­posal

The Record (Troy, NY) - - FRONT PAGE - By Ken Thomas and Marcy Gor­don

House Speaker Paul Ryan on Thurs­day lam­basted high-tax states like Cal­i­for­nia, New York and New Jersey, ar­gu­ing the rest of the coun­try is “prop­ping up prof­li­gate, big-gov­ern­ment states” even as they pay bil­lions more in taxes than they re­ceive in re­turn from the fed­eral gov­ern­ment.

Ryan’s at­tack came as he de­fended the Repub­li­can tax pro­posal that would re­peal the fed­eral de­duc­tion for state and lo­cal taxes, say­ing it has forced the rest of the coun­try to sup­port those states’ high taxes and reck­less spend­ing.

House Repub­li­cans from those states are buck­ing Pres­i­dent Don­ald Trump’s tax over­haul pack­age and GOP lead­er­ship over the pop­u­lar tax de­duc­tion. The move to end the state-lo­cal de­duc­tion has an­gered GOP law­mak­ers and caused them to balk at sup­port­ing the nearly $6 tril­lion tax over­haul plan. The de­duc­tion is claimed by around 44 million peo­ple and costs the gov­ern­ment an es­ti­mated $1.3 tril­lion in lost rev­enue over 10 years.

“States that got their act to­gether are pay­ing for states that didn’t,” Ryan said at an ap­pear­ance at the con­ser­va­tive Her­itage Foun­da­tion. He said the rest of the coun­try is “prop­ping up prof­li­gate, big-gov­ern­ment states.”

The three states send far 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.

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

“This is re­ally al­most like a life or death is­sue for dis­tricts like mine,” says Repub­li­can Rep. Peter King, who rep­re­sents a dis­trict on New York’s Long Is­land. “This can­not be called a rich dis­trict. It serves a lot of mid­dle-in­come peo­ple.”

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

Rep. Chris Collins, RN.Y., a Trump ally, warned Wed­nes­day that states such as New York, New Jersey, Cal­i­for­nia and Illi­nois would need some “ac­com­mo­da­tions” to go along with elim­i­nat­ing the de­duc­tion for state and lo­cal taxes paid, pos­si­bly a cap on how much could be de­ducted.

Com­pletely scrap­ping the de­duc­tion “would im­pact too many mid­dle-in­come peo­ple,” Collins said.

Some Repub­li­cans and a coali­tion of groups op­posed to the changes con­tend that re­peal­ing it would sub­ject peo­ple to be­ing taxed twice and would amount to a fed­eral rev­enue grab on the backs of home­own­ers who pay prop­erty taxes. And gover­nors like New York’s An­drew Cuomo, a po­ten­tial 2020 pres­i­den­tial can­di­date, have ral­lied against the change.

“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. “For what? Tax cuts for the wealthy.”

The White House has ar­gued that the plan is fo­cused on help­ing mid­dle-class work­ers, ar­gu­ing that low­er­ing cor­po­rate rates will boost jobs while the tax cuts and sim­pler tax code will re­duce their bur­den.

Ad­min­is­tra­tion of­fi­cials con­tend the rest of the na­tion shouldn’t have to sub­si­dize states like Cal­i­for­nia and New York that use the state and lo­cal tax de­duc­tion in large num­bers.

But that ar­gu­ment has drawn a strong re­tort from the states.

“New York­ers send over $50 bil­lion more to the U.S. gov­ern­ment than they re­ceive back. So New York­ers, and in par­tic­u­lar Long Is­landers, are sub­si­diz­ing the rest of the coun­try; not the other way around as you sug­gested,” wrote Kevin Law, pres­i­dent and CEO of the Long Is­land As­so­ci­a­tion, in a let­ter to Treasury Sec­re­tary Steve Mnuchin.

THE AS­SO­CI­ATED PRESS

House Speaker Paul Ryan of Wis., holds up a copy of a pro­posed “sim­ple tax” post­card while speak­ing at the Her­itage Foun­da­tion in Wash­ing­ton Thurs­day.

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