Paul Ryan: Payroll tax cuts nothing but 'sugar high'

Ryan’s comments on the payroll tax at the policy breakfast were part of his broader point that business uncertainty about the tax code is currently one of the larger impediments to economic growth.

The House GOP budget, largely crafted by Ryan, looks to revamp the tax code by shaving both the top individual and corporate tax rates down to 25 percent, while eliminating a host of tax credits and deductions. The current top marginal rate for both individuals and corporations is 35 percent.

Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, is holding a string of hearings on tax reform right now, and Ryan said at the Thursday policy discussion that he was satisfied with the current pace of discussions on the issue.

The Budget chairman also told The Hill after the breakfast that he supported rolling back an ethanol tax credit that has been center stage in the Senate this week, but that he believes revenue gained from ending the tax break should go toward a tax overhaul. 

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With job creation stagnant, administration officials have floated the idea of further payroll tax relief at the debt-ceiling discussions being led by Vice President Biden. 

But the idea has gotten a cool reception from Republicans including Ryan, including Sen. Lamar Alexander (R-Tenn.) and Rep. Jeb Hensarling (R-Texas). Some Democrats are also concerned about the idea because the payroll tax funds Social Security. 

“We’ve already experimented with these ideas, over and over again, both in the Bush administration and in this administration,” Ryan said. “We should go with what we know works.”

Ryan also expressed frustration with Democrats for holding up progress on tax reform by not having produced a budget, even as he said he was fine with how that conversation was proceeding.

Because there was no Senate budget, the congressman said, “that makes it really difficult to do a tax bill. There’s no reconciliation. There’s no budget process.”

“Unfortunately, on the other side of the Rotunda, they’ve just stopped the entire process,” Ryan said. 

But there are other potential roadblocks as well. The administration, for instance, has said that the tax reform talks need to be put on the back burner until after lawmakers have dealt with the $14.3 trillion debt ceiling, which the Treasury Department says needs to be done by Aug. 2.

The administration has also signaled that it would like to focus more on the corporate code, while Camp and other policymakers would like to try for a more comprehensive overhaul.

At the breakfast, Scott Hodge, the president of the Tax Foundation, indicated that officials should push forward on tax reform, noting that other industrialized countries were reducing their corporate rates.

For his part, Ryan sounded hopeful that the Biden talks would reach an agreement to raise the debt ceiling, a deal that he believed would contain a higher amount of spending cuts than an increase in the debt limit. 

In the aftermath of Tuesday’s Senate vote – in which 34 GOP senators voted to end an ethanol tax credit without any promise that there would be a vote to offset the cost – Democrats have been pushing the case that Republicans are more open to using new tax revenue in reducing the deficit.

The Senate is set to vote again on Thursday on the ethanol credit, which the Government Accountability Office said cost $5.4 billion in 2010. 

Ryan told The Hill after Thursday’s policy discussion that the push against ethanol was a sign that Republicans “are getting sick of crony capitalism.”

“Picking winners or losers either through spending, regulating, or taxing. And we’ve always believed that broadening the tax base should be done as part of lowering tax rates,” he added.

But the congressman also did not sound open to using the revenue from eliminating tax breaks to reduce the deficit.

“We’re not going to raise taxes,” Ryan said, when asked about the Biden debt-ceiling talks. 

Karen Harbert of the U.S. Chamber of Commerce’s Institute for the 21st Century told the breakfast that scrapping tax credits and deductions for the oil-and-gas industry – another favorite Democratic target for deficit reduction – could be counterproductive and hurt the economy.