TEXAS TAXPAYERS FINALLY GET THEIR DUE
The year 2004 marks two important milestones for young Texans. Eighteen-year-old Texans will they get their chance to cast their first ballot in a Presidential election. Secondly, for the first time since these young men and women were born, Texas taxpayers can again take advantage of a major federal tax write-off. President Bush recently signed into law a bill restoring the ability of Texans to deduct their state and local sales taxes from their federal income taxes for fiscal years 2004 and 2005.
Simply put, the law reinstates the sales tax deduction, which had been dropped in a 1986 overhaul of the tax code. The 1986 legislation allowed residents of states with income taxes to deduct the taxes they paid to support their state governments, while Texans were denied a similar deduction for taxes paid to support their state government. The reason was solely because Texas and six other states did not levy an income tax and relied primarily upon the sales tax.
The result of that change eighteen years ago was to force 55 million Americans, or nearly one in five, to pay more than their fair share of federal taxes. This measure costs Texas families itemizing their deductions an average of $408 per year.
Since I came to the Senate, I have worked with my colleagues and sponsored legislation to restore the state sales tax deduction. Today, I am pleased to announce this victory for tax equity.
The American Jobs Creation Act of 2004 (H.R. 4520/S. 1637) includes language to allow a state sales tax deduction. This will give Texas taxpayers and those living in the six other states without a state income tax the option of deducting state and local sales taxes on their federal income tax returns in 2004 and 2005.
The 1986 change was not fair to those citizens living in states which do not levy income taxes. Local voters, through their elected representatives, have chosen to fund their state and local governments through income taxes, sales and property taxes, or some combination of these systems. It is simply not right for the federal government to provide favorable treatment to one system of taxation and not the others.
The change was wrong for another reason: Texans should not be taxed on our taxes.
The restoration of the sales tax deduction will not force Texas taxpayers to keep a shoebox filled with a year’s worth of sales receipts, unless they choose to do a full itemization. Instead, they will be able to use sales tax tables compiled by the Secretary of the Treasury to determine the amount of the deduction to which they are entitled. These estimates will take into account the taxpayer’s state of residence, filing status, number of dependents, adjusted gross income, and state and local sales tax rates. It is important to note that Texans will want to hang onto receipts for big-ticket items such as boats, cars or trucks. The new law allows a taxpayer to write off the taxes on those large items in addition to the amount they derive from the sales tax tables.
This relief for Texas taxpayers took a lot of work, and was the result of bipartisan cooperation in both the Senate and the House of Representatives. Congressman Kevin Brady (R-Woodlands) and House Majority leader Tom DeLay (R-Sugar Land) led the effort in the House. In the Senate, I found many Republicans and Democrats who understood this was a matter of tax fairness.
The Texas economy will also benefit from fixing this flaw in our federal tax system. The average family of four will save $928 in federal taxes each year. This means, according to the Texas Comptroller, more than $974 million will stay in the hands of Lone Star State taxpayers and will lead to: 21,798 new jobs, an increase in state sales tax income of about $49.7 million, and an increase of $1.2 billion in state gross product, including $819 million in new investment. That positive impact explains why I am committed to making this deduction permanent.
October 22, 2004