Posted 9:18 pm Friday, November 30, 2012
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Sales tax deduction should be renewed
President Barack Obama continues to claim his goal for avoiding the fiscal cliff is “fairness.” If that’s so, he and congressional leaders will ensure that a provision in the Bush tax cuts, allowing residents of Texas and some other states, to deduct sales taxes, will be extended.
Americans who pay state income taxes are able to deduct those from their federal taxes, but until just a few years ago, Americans in states funded mainly through sales taxes didn’t get the same break.
But through the leadership of Sen. Kay Bailey Hutchison, among others, the deduction was finally granted in 2004 — as a temporary measure. It was extended in 2006, but it expired at the end of 2011. It has not yet been renewed for the 2012 tax year.
Sen. Hutchison and some colleagues have written to Obama about the matter.
“Providing the deduction for state and local sales taxes is a matter of fairness for millions of taxpayers in Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming,” the letter explains. “Residents of states that levy income taxes have long been able to deduct these state income taxes through a permanent deduction. However, taxpayers in our states, which use sales taxes in lieu of income taxes to finance government services, have been treated inequitably since 1986, when the permanent deduction for state and local sales taxes was eliminated.”
It’s not just a matter of fairness; it’s an economic necessity, the senators say.
Americans who pay state income taxes are able to deduct those from their federal taxes, but until just a few years ago, Americans in states funded mainly through sales taxes didn’t get the same break.
But through the leadership of Sen. Kay Bailey Hutchison, among others, the deduction was finally granted in 2004 — as a temporary measure. It was extended in 2006, but it expired at the end of 2011. It has not yet been renewed for the 2012 tax year.
Sen. Hutchison and some colleagues have written to Obama about the matter.
“Providing the deduction for state and local sales taxes is a matter of fairness for millions of taxpayers in Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming,” the letter explains. “Residents of states that levy income taxes have long been able to deduct these state income taxes through a permanent deduction. However, taxpayers in our states, which use sales taxes in lieu of income taxes to finance government services, have been treated inequitably since 1986, when the permanent deduction for state and local sales taxes was eliminated.”
It’s not just a matter of fairness; it’s an economic necessity, the senators say.
“This deduction impacts the effective tax rates of taxpayers and equates to real money in the pockets of the 22 percent of Americans who claim the state and local sales deduction on their itemized tax return,” they contend. “Extending this deduction will help put money back in the pockets of taxpayers in our states and stimulate economic growth.”
How much? An estimated $500 per person per year.
Sen. Hutchison has some important allies in this fight; Sen. Patty Murray of Washington, a member of the Democratic leadership team, has long supported this deduction.
But Sen. Murray has made some worrisome statements lately, about allowing Washington to go over that cliff, in order to increase Democratic leverage.
“Murray reasons that might make it easier to get Republicans to agree to reinstate the cuts only for the middle class and let the nation’s wealthiest 2 percent pay more toward the reducing the debt, as Democrats desire,” the Washington Post reported. “Suddenly, Congress would be voting to lower taxes for the vast majority of Americans, rather than agreeing to raise them for a few.”
That would be disastrous, and would leave Texans and others on the hook for taxes that residents of other states don’t have to pay.
Sen. Hutchison might find yet another powerful ally. Senate Majority Leader Harry Reid’s home state of Nevada would also be hit, and he’s under increasing pressure there to make the deduction part of any tax deal.
That’s important. It’s also important to make the deduction permanent — so we don’t have to fight this battle all over again.
How much? An estimated $500 per person per year.
Sen. Hutchison has some important allies in this fight; Sen. Patty Murray of Washington, a member of the Democratic leadership team, has long supported this deduction.
But Sen. Murray has made some worrisome statements lately, about allowing Washington to go over that cliff, in order to increase Democratic leverage.
“Murray reasons that might make it easier to get Republicans to agree to reinstate the cuts only for the middle class and let the nation’s wealthiest 2 percent pay more toward the reducing the debt, as Democrats desire,” the Washington Post reported. “Suddenly, Congress would be voting to lower taxes for the vast majority of Americans, rather than agreeing to raise them for a few.”
That would be disastrous, and would leave Texans and others on the hook for taxes that residents of other states don’t have to pay.
Sen. Hutchison might find yet another powerful ally. Senate Majority Leader Harry Reid’s home state of Nevada would also be hit, and he’s under increasing pressure there to make the deduction part of any tax deal.
That’s important. It’s also important to make the deduction permanent — so we don’t have to fight this battle all over again.
