Representative Paul Ryan is trying to revive a federal tax deduction that he previously said should be eliminated.
Ryan is the chairman of the U.S. House Ways and Means Committee, which is set to reinstate an expired provision that lets federal taxpayers deduct state and local sales taxes.
The proposal would include no expiration date, making sales tax deductibility part of ongoing law and costing the government $42.4 billion in forgone revenue over a decade.
The bill, set for a committee vote Thursday, is at odds with Ryan’s position on state tax deductibility. In a 2014 interview with talk radio host Hugh Hewitt, Ryan, a Wisconsin Republican, suggested that the federal tax deduction for state taxes effectively subsidizes profligate state governments. He said he would get rid of the break and use the proceeds to cut tax rates.
“Go complain to your governor or your state representative, but don’t make people from states that have got their fiscal house in order pay for the states that don’t,” he said then. “Why should Wisconsin pay for Illinois?”
Under current law, income and property taxes are deductible. The optional deduction for sales taxes routinely expires and gets revived temporarily.
Ryan was speaking in 2014 “in the context of comprehensive reform, which remains the ultimate goal,” Brendan Buck, a Ryan spokesman, said in an e-mailed statement. “We can provide tax certainty to families and small businesses at the same time we work toward broader reform.”
Ryan has been focusing on major changes to the U.S. business tax system. He and President Barack Obama have both said that they are probably too far apart on individual tax policy to reach a deal before Obama leaves office in January 2017.
What that leaves in limbo are the dozens of tax breaks that lapsed at the end of 2014, including the sales tax deduction.
State sales deductibility is an important issue in states such as Texas, Florida and Washington that lack personal income taxes.
Being able to deduct state and local income and property taxes is a priority for lawmakers from high-tax states including California, New Jersey and New York.
It’s one of the biggest tax breaks for individuals, and repealing it would generate $1.1 trillion over a decade. That could be used to lower tax rates, reduce the budget deficit or expand government programs, according to the Congressional Budget Office.
Ryan’s move on state and local taxes this week would create a potential advantage for him if and when Congress does revamp the individual tax system.
Making the breaks a permanent part of the tax code now would lower revenue projections going forward, so that a revamped tax code wouldn’t have to raise as much money.
The House is also scheduled to vote this week on bills that would revive and indefinitely extend breaks for small businesses and charities. And the Ways and Means Committee is doing the same thing with the research tax credit.
The bills probably won’t become law. The White House has threatened to veto the measures that will be on the House floor this week because they lack budgetary offsets.
Representative Richard Neal, a Massachusetts Democrat on the Ways and Means Committee, wondered why Ryan wasn’t following the model of his predecessor as Ways and Means chairman, Dave Camp, who tried and failed to advance a major tax bill before moving to revive lapsed breaks.
“I wonder now how serious Paul Ryan is about tax reform,” Neal said in a brief interview.
© Copyright 2021 Bloomberg News. All rights reserved.