FOR IMMEDIATE RELEASE
July 10, 2003
CONTACT: Kevin Schweers
SENATOR HUTCHISON URGES TAX FAIRNESS FOR TEXANS
Pushes for Deduction on State and Local Sales Tax
WASHINGTON, DC -- U.S. Senator Kay Bailey Hutchison (R-TX) is calling on Senate leaders of the tax-writing Finance Committee to allow residents of seven states – including Texas – to deduct state and local sales taxes from their federal income taxes.
Today Senator Hutchison sent a letter to Senator Charles Grassley (R-IA), Chairman of the committee, urging him to address this tax inequity should additional tax items be considered during House-Senate negotiations to expand the child tax credit. Under current law, taxpayers in states that rely on sales taxes do not have a deduction option enjoyed by citizens in states with income taxes. Below is the full text of Senator Hutchison's letter, a copy of which was also sent to other members of the conference.
"As you convene the conference for H.R.1308, I want to bring an issue to your attention that is particularly important to all families in my home state of Texas and several other states, and that is creating a state and local sales tax deduction. This is an issue I wanted to raise when the bill was considered in the Senate, but I withheld in order to facilitate the timely consideration of the legislation. Should the addition of any other miscellaneous tax items be considered during the conference, creating a sales tax deduction should be a high priority.
"Prior to 1986, taxpayers were permitted to deduct all of their state and local taxes paid when computing their federal tax liability. The philosophy behind these deductions is simple: people should not have to pay taxes on their taxes. Unfortunately, the deduction for state and local sales tax was eliminated in the 1986 tax reform legislation. This discriminates against taxpayers in states that rely on sales taxes rather than income taxes for revenue. Federal tax law should not treat people differently on the basis of state residence, nor should federal law indirectly encourage states to impose an income tax on their citizens.
"This discrepancy has a significant impact on the citizens of several states, including Texas. 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 lead to the creation of more than 16,000 new jobs and add almost $900 million in economic activity. The impact of this growth would be particularly beneficial during this period when many states are facing record-breaking deficits. At the same time, such a tax change would cost the federal government less than one percent of what the current state and local income tax deduction costs.
"H.R. 1308 is intended to provide tax relief to working families. A sales tax deduction would also provide important relief to families who are penalized by this unfair discrimination in the tax code. Thank you for your consideration of this issue."
#