Top state legislators from around the country told their congressional counterparts Tuesday to keep their hands off traditional state tax resources. Few solid proposals have leaked out of the White House deficit-reduction talks with leaders of Congress, but those that have-increases in excise taxes and a limit on the amount of state and local taxes that can be deducted on federal income tax returns-drew the state lawmakers to Washington for a hastily arranged day of lobbying to try to nip the proposals in the bud.
”We know that a deficit-reduction plan must contain cuts in spending, and we understand that the states are going to have to absorb some of those cuts,” said Illinois House Minority Leader Lee Daniels (R-Elmhurst), who is president of the National Conference of State Legislatures.
”But then when you take away (states`) sources of revenue, you are really hamstringing states.”
Daniels met with Senate Majority Leader George Mitchell (D-Maine), House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.), House Minority Leader Bob Michel (R-Ill.) and deputy White House Chief of Staff Andrew Card to warn them that many states struggling with their own tight budgets cannot afford to lose revenue.
Illinois Senate President Philip Rock (D-Oak Park) also made the rounds of Capitol Hill, concentrating on the Illinois congressional delegation.
The controversial ideas were floated by congressional Republicans and White House officials last week.
Daniels argued that capping the deduction on federal tax returns for state and local taxes at $10,000 would increase the federal income tax bill for Illinois residents by $143.6 million, affecting 39,960 of the 1.5 million Illinoisans who claim the deduction.
Excise taxes on liquor, gasoline and tobacco are traditional state revenue sources, he said, and higher federal taxes on them would reduce consumption and lower revenue to the states.
Although the proposals would raise only $3 billion in federal revenue, a fraction of $50 billion that needs to be cut from the budget or raised in taxes, the swift negative response shows the difficulty the budget negotiators will have in developing a plan that can win wide acceptance.
An increase in the federal income tax would have the least impact on state revenues, Daniels said, but he opposes it.
Daniels said he won`t tell Congress how to trim the federal deficit, only how not to trim it.
Meanwhile, negotiators reported little progress toward proposals to trim the deficit next year, and the House voted 221-205 to raise the federal debt ceiling by $322 billion.
The extension of the government`s authority to borrow money-which should see it through the next year-was accompanied by a provision to stop using the Social Security system`s huge surpluses to make the annual federal deficit look smaller.
