February 14, 2006

Reid Applauds Senate Action That Would Protect Nevada Taxpayers

Measure Would Make Sales Tax Deduction Permanent

Washington, D.C. – Senator Harry Reid (D-NV) today praised a Senate vote that could protect Nevadans from paying an unfair amount in federal taxes. The Senate passed a measure today recommending that the sales tax deduction be made permanent. The vote was 75 to 25; Reid voted for the measure.

“I’m so pleased with today’s vote,” said Reid. “The sales tax deduction levels the playing field for Nevada families and it should be made permanent. No one should have to pay more in federal taxes because their state chooses to raise revenue through sales tax instead of income tax; that’s a decision that rightly should be left to state governments, with no penalty.”

Taxpayers used to be able to deduct their state income tax and state sales tax payments on their federal tax returns. The sales tax deduction was eliminated under a tax reform bill passed in 1986. Most Americans still had a substantial deduction for their state income tax, but eight states have no broad-based income tax – Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. Residents of those states lost most of their tax relief for their state payments.

Congress temporarily reinstated the sales tax deduction in 2004. Under the new laws, taxpayers who itemize can choose to deduct either their state income tax payments or their state sales tax payments. Those deducting sales taxes could either provide sales tax receipts to the IRS or use an IRS table listing state sales tax averages by income.

However, the law was only in effect for two years and expired at the end of 2005. Today’s Senate vote – although not binding - asks House and Senate conferees on a comprehensive tax bill to include a provision making the sales tax deduction permanent.

Reid is also sponsoring a separate bill that would make the sales tax deduction permanent. He vowed to work for passage of that bill if the sales tax provision is not passed with the larger tax measure.

“There isn’t much I like about this tax bill, but the permanent sales tax deduction is one provision that deserves to pass, and I’ll keep working until it does” said Reid.

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