Renew deduction, make it permanent

Published 7:39 pm Monday, February 16, 2015

 

If Washington is serious about tax fairness, then Congress and the president should support a sales tax deduction bill filed last week by Texas Congressman Kevin Brady, R-The Woodlands.

The bill would let Americans in states with no state income tax — like Texas and Florida — continue to deduct their sales taxes from their federal income taxes.

Citizens elsewhere are allowed to deduct their state income tax from their federal income tax, so it’s really a matter of equity.

The bill making the sales tax deduction permanent passed out of the House Ways and Means Committee on Thursday.

The sales tax deduction was something former Sen. Kay Bailey Hutchison fought long and hard for. She joined with Democratic Sen. Patty Murray of Washington to win passage of a deduction — albeit temporary — in 2004, and an extension in 2006. Since then, it’s been a constant fight to keep it.



The deduction is in place for federal income taxes due on April 15, but not for next year.

There are some policy reasons why some people oppose making it permanent. Many in Washington believe sales taxes are the wrong way to pay for government services — they’re not considered a “progressive” tax.

However, sales taxes are more fair, in the sense that Obama often uses that elusive word. Everyone pays something in sales taxes. That means everyone has a stake in government. Progressives like income taxes because they can use exemptions to reward, discourage and influence various behaviors.

(To be sure, sales tax exemptions can be used the same way.)

The sales tax is, in fact, “progressive” in that the wealthy pay more than the poor and the middle class — because they buy more stuff, and more expensive stuff.

Sen. John Cornyn is picking up where Sen. Hutchison left off. He filed a permanency bill in January.

“This is a matter of fundamental fairness for Texas taxpayers and one that puts them on a level playing field with taxpayers who can deduct their state income tax,” Cornyn said in a statement. “As Texans continue to face higher health care costs under Obamacare, now more than ever they need relief from burdensome taxation so they can keep more of their hard-earned money.”

Ironically, tax-and-spender Senate Minority Leader Harry Reid is a staunch supporter of an extension of the sales tax deduction. He’s under lots of pressure in his home state of Nevada.

“Nevada is one of nine states that do not have an income tax, instead funding government largely through sales taxes,” opined his hometown newspaper, the Las Vegas Review-Journal, the last time this came up. “It’s a mostly voluntary system that taxes people on what they consume — and puts more money in their pockets to spend on goods and services — instead of penalizing them for being gainfully employed.”

Of course, to enjoy the deduction, taxpayers have to first claim it. Only about a quarter of Texas taxpayers take advantage of the deduction, and those who don’t are giving away money they don’t have to.

Make the sales tax deduction permanent.