TAX RELIEF FOR TEXANS
April is a special time in Texas. It brings bluebonnets, warm weather and the season opener of baseball. But it also gives rise to the most dreaded time of year - tax day. Each April 15, millions of Texans dutifully organize their paperwork, fill out their forms, sign on the dotted line, and send their tax returns to the Internal Revenue Service. Some merit a check from Uncle Sam, others end up owing money. But no matter what the outcome, one thing is certain: Texans are singled out for double taxation.
State and local governments raise revenue in a variety of ways. Some levy income taxes, some impose sales taxes and others use a combination of the two. Citizens who pay state and local income taxes can offset some of what they pay by taking a deduction on their federal tax. But those without an income tax - like Texas - cannot deduct the sales taxes paid to support state and local government.
The philosophy behind these deductions is simple and straightforward: people should not have to pay taxes on their taxes. The money given to one level of government should not be taxed by another level.
In 1986, a landmark tax reform law eliminated the deduction for state and local sales tax, but not the deduction for income tax. As a result, 23 million taxpayers from states like Texas, who pay sales tax but no income tax, have been penalized ever since.
This discrepancy has a significant impact on our state. According to the Texas Comptroller, if taxpayers could deduct their sales taxes, more than $700 million would stay in the hands of Texans. This could add almost $900 million in economic stimulus.
In February, I introduced legislation to correct this inequity. My bill would give all taxpayers the option of deducting state and local sales taxes or income taxes when calculating their federal taxes.
Additionally, Congress is working to accelerate the 2001 tax relief and make it permanent. Currently, because of the procedure we were forced to use to pass the tax cuts in 2001, it will sunset in 2011 and the relief will disappear. It is imperative to have stability in our tax code. Americans must be able to plan for the future, and make work, investment and retirement decisions based on consistency. An ever-changing tide of tax laws makes that impossible.
This April as you file your taxes, you can do so with the certainty that in Congress, we are working to relieve Americans from excessive taxation. We want to make sure our tax code is fundamentally fair. At a time when our economy is lagging and many people find themselves coming up short, it is more important than ever to allow Americans to keep more of their hard-earned money.
April 11, 2003