A leader of Republican efforts to cut government spending and tackle the federal deficit indicated Thursday that he embraces the idea of cutting so-called tax expenditures.
A leader of Republican efforts to cut government spending and tackle the federal deficit indicated Thursday that he embraces the idea of cutting so-called tax expenditures. He cautioned, however, that it is too early to tell whether he and his GOP colleagues will go after favorable tax treatment for retirement plans and insurance policies.
“We have to face the tax expenditure gauntlet,” Rep. Paul Ryan, R-Wis., the new chairman of the House Budget Committee, said at an event at the National Press Club. “How you do that matters greatly to our economic competitiveness.”
Mr. Ryan, who has gained a reputation as one of the capital's foremost proponents of fiscal discipline, said he supports an overhaul of the tax system which would broaden the tax base and lower rates.
That was one of the goals of the reform plan offered by a presidential deficit commission in December. The panel's proposal called for the elimination of all federal tax expenditures, including killing tax breaks and deferrals for retirement, life insurance and employer-sponsored-health-care plans.
The money saved through ending the expenditures would allow individual rates to drop to 8%, 14% and 23% from their projected 2011 levels, which range from 15% to 39.6%.
The commission's plan did not gain enough votes to force congressional action. Mr. Ryan served on the panel and voted against the proposal.
He said that tax reform should be a priority in the new Congress, however, because it can lead to stronger economic growth. He acknowledges that the details of a tax overhaul will draw strong opposition from many interest groups.
“We're looking out for the American people,” Mr. Ryan said. “We're looking out for the American economy. We're not looking out for this narrow special interest that has a little piece of the tax code carved out which serves as a direct barrier to entry against … competitors.”
The insurance industry will fiercely defend tax-deferred buildup of cash value in life insurance polices, and the tax-free death benefits of those plans. Industry groups argue that 75 million American families have insurance products in their portfolios.
“What we don't want to do is for the American public to be disincented to provide for their own financial security and, therefore, creating a greater dependence on government,” said Terry Headley, president of the National Association of Insurance and Financial Advisors.
He said that NAIFA is taking that message to members of Congress.
“These are conversations we are having and will continue to have,” Mr. Headley said.
It's too soon to tell whether NAIFA and other groups will be persuasive in protecting their favorable tax status. Mr. Ryan promised many hearings on tax issues over the course of the two-year Congress.
“Do I believe there's a majority within the majority [of House Republicans] for tax reform? Yes, I do,” Mr. Ryan said. “We have to figure out how best to achieve that. I can't answer that question yet, because we haven't even begun to do our research on it.”
