By J. Lyn Carl, GalleryWatch.com
Austin, TX –
Texans could see their one-year's deduction of state and local sales taxes from their federal income tax become a permanent deduction if legislation outlined today in a press conference by U.S. Sen. Kay Bailey Hutchison (R-Texas) and Congressman Kevin Brady (R-The Woodlands) passes.
The state's senior senator said she has introduced Senate Bill 27, which would make permanent the deduction of state and local sales taxes from federal income tax returns in states without a state income tax.
During the last session of Congress, legislation passed that allowed residents of Texas who itemize on their federal income tax to deduct local and state sales tax. The measure followed what many called 18 years of "tax inequity," because other states with state income taxes were allowed to deduct those sales taxes from their returns.
"Last year we scored an important victory for tax fairness by restoring the state sales tax deduction," said Hutchison. "Now we need to turn that victory into a lasting one and make this deduction permanent."
Calling the issue a matter of "simple tax equity," Hutchison said the federal government should not treat people differently based on their state's tax collection methods. She said making the measure permanent will create jobs and "result in larger disposable incomes for Texas families."
"It's an issue of fairness that Texas families be able to deduct every penny of state and local sales tax they pay throughout the year from their federal tax bill," said Brady, "especially when families in most states are deducting their state income taxes." As a member of the tax writing Ways and Means Committee in the House, Brady is in a position to move tax measures through Congress.
Texas is among only seven states - including Florida, Nevada, South Dakota, Tennessee, Washington and Wyoming - with a sales tax but no state income tax. The deduction for sales taxes on residents of those states' federal income tax was eliminated in 1986, and now affects 55 million residents of the affected seven states.
State Comptroller Carole Keeton Strayhorn has previously noted that the average Texas family that itemizes its federal income tax could save as much as $408 per year with the additional deduction for sales taxes. A family of four with a median annual income of $58,000 that happens also to purchase a car during the tax year could potentially have an additional tax deduction of $1,918.
The Texas comptroller projected the net tax savings would open the door for the creation of as many as 21,798 new jobs in Texas and a $923 million increase for 2005 in the Gross Sales Product. With more money in their pockets from the sales tax deduction, Strayhorn said, Texas sales tax receipts likely would increase by as much as $38 million.
Hutchison said preserving the tax deduction will be a top priority during the current session of the U.S. Congress. "I am hopeful we can get the job done this year," she said.
The Texas senator led the bill to passage in the Senate during the last session of Congress, while Brady and House Majority Leader Tom Craddick of Sugar Land steered the legislation to passage in the U.S. House.
Fellow Texas Senator John Cornyn is a co-sponsor of Hutchison's legislation. Other co-sponsors include Senate Majority Leader Bill Frist (R-Tenn.), and Sens. Lamar Alexander (R-Tenn.), Maria Cantwell (D-Wash.), John Ensign (R-Nev.), and Patty Murray (D-Wash.). Brady will introduce a companion bill in the House and has the support of Majority Leader DeLay for the initiative.
To take advantage of the deduction, taxpayers can either collect receipts or use tables provided by the Department of Treasury. Those using the tables can also use receipts to deduct taxes paid on large purchases.
For more information about the sales tax deduction and the IRS deduction charts and worksheets for calculating your deduction log onto www.house.gov/brady.