State Sales Tax Deduction
State and local governments have several alternatives for raising revenue. Some levy income taxes, some use sales taxes, and others employ a combination of the two. The citizens who pay state and local income taxes are able to offset some of what they pay by receiving a deduction on their federal taxes.
It is unfair to give residents of some states a deduction for the revenue they provide while not doing the same for citizens in other states, like Texas. For this reason, I led the effort in the Senate to include a provision in the American Jobs Creation Act of 2004 that established a deduction for state and local sales taxes which passed Congress in early October and was signed by President Bush on October 22, 2004.
With the passage of this legislation, Texans were able to deduct the total amount of state and local sales taxes paid by accumulating receipts or using tables provided by the Treasury Department. The deduction was effective for 2004 and 2005, and I am committed to making this deduction permanent. Recently, I introduced a motion to instruct conferees on the tax reconciliation bill to include a permanent state sales tax deduction in the conference bill, and it passed with broad bi-partisan support. Though the deduction was not included in the recently-passed Tax Increase Prevention and Reconciliation Act, a two-year extension of the deduction is planned for inclusion in a trailer package of tax cuts to come later this year, and I will continue to work for permanent implementation of a sales tax deduction.
