Ryan crit­i­cizes high-tax states

Faces back­lash from fel­low GOP law­mak­ers.

The Times-Tribune - - Local / Nation - BY MARCY GOR­DON AND KEN THOMAS

AS­SO­CI­ATED PRESS 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, 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 to ful­fill his prom­ise of boost­ing eco­nomic growth.

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 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 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 high­tax 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 ($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 busi­ness­friendly 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 po­si­tion on end­ing the de­duc­tion ap­peared hard­ened. His 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.

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.

SU­SAN WALSH / AS­SO­CI­ATED PRESS

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

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