FOR IMMEDIATE RELEASE
January 26, 2005
CONTACT: Kevin Schweers
SENATOR HUTCHISON PROPOSES MAKING STATE SALES TAX DEDUCTION PERMANENT
Bill Would Save Texans $974 Million Annually, Create Over 21,000 New Jobs
WASHINGTON, DC -- Sen. Kay Bailey Hutchison (R-Texas) announced a bipartisan, bicameral effort today to permanently grant taxpayers living in states without a state income tax the option of deducting state and local sales taxes on their federal income tax returns. After 18 years of tax inequity, Congress restored the deduction last year for 2004 and 2005, but it is scheduled to sunset at the end of 2005 without further action. Sen. Hutchison led that effort in the Senate and Congressman Kevin Brady (R-The Woodlands) and House Majority Leader Tom DeLay (R-Sugar Land) spearheaded it in the House of Representatives.
Sen. Hutchison has now introduced legislation (S. 27) to make the deduction permanent. Cosponsors of the measure include Senate Majority Leader Bill Frist (R-Tenn.), and Senators Lamar Alexander (R-Tenn.), Maria Cantwell (D-Wash.), John Cornyn (R-Texas), John Ensign (R-Nev.), and Patty Murray (D-Wash.). Congressman Brady will introduce a companion bill in the House and has the strong support of Majority Leader DeLay for the initiative.
“Last year we scored an important victory for tax fairness by restoring the state sales tax deduction. Now we need to turn that victory into a lasting one and make this deduction permanent,” said Sen. Hutchison, who led the 2004 campaign, along with Reps. Brady and DeLay. “This is a matter of simple tax equity. The federal government shouldn’t treat people differently on the basis of their state’s tax collection methods. In addition, this deduction will create new jobs and result in larger disposable incomes for Texas families. Preserving it will be one of my top priorities and I am hopeful we can get the job done this year.”
The average Texas family that itemizes could save $408 on their federal taxes per year, or $974 million overall, according to the Texas Comptroller’s office. The same report says the provision would create 21,798 jobs and spur $819 million in new investment. A family of four with an income of $58,000 that purchases a new $18,000 car could deduct an additional $1,918. To take advantage of the deduction, taxpayers can either collect receipts or use tables provided by the Department of Treasury (those using the tables can also use receipts to deduct taxes paid on large purchases). Aides to Sen. Hutchison estimate the cost of the legislation to be approximately $3 billion annually.
Residents of 41 states can deduct state income tax payments, but Texas is among seven states with a sales tax but no personal income tax (the others are Florida, Nevada, South Dakota, Tennessee, Washington and Wyoming). The deduction was eliminated in 1986, and now affects 55 million residents of the seven states with sales taxes but no income taxes.
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