By Kim Dixon
WASHINGTON, Sept 20 The U.S. Congress' top
Republican on tax policy is drawing up a plan to rewrite the tax
code and is likely to recommend repeal of a popular and costly
federal tax deduction for state and local taxes paid,
congressional aides said.
House of Representatives Ways and Means Committee Chairman
Dave Camp, who is expected to unveil his plan soon, is pushing
forward with the idea of a tax code overhaul despite
expectations that this Congress is too fractured to take on such
a big project.
The provision, available only to the roughly one-third of
federal taxpayers who itemize, allows taxpayers to deduct from
their income the value of state and local property tax paid, as
well as state and local income or sales tax paid.
Claimed by 46.6 million Americans in 2011, the deduction
reduced U.S. tax revenues that year by an estimated $42 billion,
making it one of the largest tax breaks in the code.
With lawmakers faced off across a deep partisan fiscal
divide, Camp's determination to proceed reflects a personal
conviction that the tax code badly needs work.
Future discussions on tax policy could begin with the plan
Camp hatches and the lawmaker has said nothing is off-limits.
"Everything is on the table means everything is on the
table," said Michelle Dimarob, a committee spokesperson.
Several bipartisan deficit-cutting panels have urged repeal
of the deduction for state and local taxes paid, including the
Simpson-Bowles commission appointed by President Barack Obama
and Congress. "It is hard to go into (tax) reform and not go
there," a top Senate Republican tax aide said.
The deduction will be significantly curtailed or axed in any
proposal put forward by Camp, said an aide who works for him.
PAYING FOR LOWER RATES
Camp, like most Republicans, wants to slash tax rates. The
cuts he envisions would sharply reduce U.S. tax revenues. Those
reductions would have to be offset, at least in part, by new
revenues, which could be found by ending some tax breaks.
The one for payment of state and local taxes tends to
disproportionately benefit wealthy people in Democratic
stronghold states. More than 30 percent of the total value of
the deduction in 2011 was claimed by New Yorkers and
Californians, according to congressional estimates.
If he targets the deduction, Camp will face stiff opposition
from Democrats who control the Senate.
Lobbyists, particularly those for state and local
governments, are not letting their guard down either.
Repealing the deduction "would fundamentally change a basic
tenet of federalism in the United States - the notion that
different levels of government don't tax each other," said Lars
Etzkorn, a lobbyist with the National League of Cities.