Cost of Government Day (COGD)
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Title: Lawmakers again press for sales-tax deduction

Date: July 13, 2003

Source: Todd J. Gillman, The Dallas Morning News

Words: 609

WASHINGTON - The IRS received about 9 million income tax returns last year from Texas. More than 2 million of those included itemized deductions.

In most states, itemizers get a bit of relief by deducting what they pay in state income tax. But Texas is one of nine states with no income tax. And under a 1986 federal tax reform law, sales taxes aren't deductible.

Texas lawmakers have tried for years to overturn that legal quirk. The latest attempt to get sales tax deductions was tucked into another bill - a proposal to expand the child tax credit. House and Senate negotiators are to meet soon to work out differences between their versions of that bill.

"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," Texas Republican Sen. Kay Bailey

Hutchison said in a letter last Thursday to Senate Finance Chairman Charles Grassley, R-Iowa, asking him to add the deduction during negotiations with House tax writers.

"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," Ms. Hutchison said.

She cited estimates from the Texas comptroller that if Texans could deduct what they pay in state and local sales taxes, they could keep more than $700 million.

Sen. Grassley has been noncommittal. But on the House side, the effort has at least one key ally, Majority Leader Tom DeLay, R-Sugar Land.

This month, Mr. DeLay endorsed a proposal to let federal taxpayers deduct either state sales taxes or state income tax payments.

"The federal government shouldn't discriminate against people because of where they live," Mr. DeLay said. "It's not fair that millions of Americans are being denied millions of dollars simply because their states can function without an income tax."

U.S. Rep. Kevin Brady, R-The Woodlands, has championed the issue for years as a member of the tax-writing Ways and Means Committee.

A bill he filed in February to allow deductibility of sales tax has 77 co-sponsors, including virtually everyone in Texas' 32-member House delegation. Most of the co-signers come from states without an income tax - Texas, Florida, Nevada, South Dakota, Tennessee, Washington and Wyoming.

Backers say lower-income households would benefit most, because the sales tax is generally considered to be a "regressive" tax, meaning the smaller the income, the bigger its relative bite.

By coincidence, Friday was "Cost of Government" day, the day that - according to anti-tax group Americans for Tax Reform marked the point at which the average worker has earned enough to pay his or her share of running federal, state and local government, and complying with various government regulations.

Mr. Brady hosted a Capitol Hill event marking the day.

"It is absolutely outrageous that Americans must work over six months for the government before they can start to earn money for their own families," Mr. Brady said. "Excessive government spending burdens working Americans and slows the economy."

For conservatives, the event was particularly somber. According to Americans for Tax Reform calculations, despite having a Republican in the White House, Cost of Government day continues to get pushed later and later each year and is now later than it has been since 1993, during President Bill Clinton's first year in office.

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