Senator Hutchison -- Press Releases

FOR IMMEDIATE RELEASE
March 24, 2004
CONTACT: Kevin Schweers

SENATOR HUTCHISON RENEWS CALL FOR CONGRESS
TO ADDRESS STATE SALES TAX INEQUITY
Texans Currently Unable to Claim State and Local Sales Tax Deductions

WASHINGTON, DC -- U.S. Senator Kay Bailey Hutchison (R-TX) today introduced bipartisan legislation to allow 55 million Americans to deduct state and local sales taxes from their federal income taxes. Under current law, residents in seven states without an income tax do not have a deduction option enjoyed by states with income taxes.

During the chamber's debate of the Foreign Sales Corporation/Extraterritorial Income (FSC/ETI) bill (S. 1637) the Senator called on her colleagues to end this disparity. She offered an amendment to make the change and ultimately withdrew it in order to expedite passage of S. 1637 to end punitive tariffs the European Union has begun to impose on U.S. products. Cosponsors of her proposal include Senate Majority Leader Bill Frist (R-TN), Senators Lamar Alexander (R-TN), Maria Cantwell (D-WA), John Cornyn (R-TX) and Patty Murray (D-WA).

"The idea behind my proposal is simple: people should not have to pay taxes on their taxes," Sen. Hutchison said. "It is unfair to give citizens from some states a deduction for revenues they provide their state and local governments, while not doing the same for citizens from other states."

If taxpayers could deduct their sales taxes, more than $700 million would stay in the hands of Texans, which could lead to 16,000 new jobs and add $900 million in economic activity. "This legislation would also help promote growth and create jobs in Texas and other states," Sen. Hutchison added.

The "State Sales and Income Tax Deduction Fairness Act," introduced by Senator Hutchison last year, would give all taxpayers the option of deducting state and local sales taxes, instead of income taxes, when calculating their federal taxes. Deductions would be determined using a table developed by the Secretary of the Treasury, based on income levels and state and local sales tax rates.

Prior to 1986, taxpayers were permitted to deduct most state and local taxes when computing their federal tax liability. Tax reform, passed in 1986, adversely affected residents of several states, including Texas, by eliminating deductions on state and local sales taxes but not on state income taxes.