Done your taxes yet? Unless action is taken soon in the U.S. Congress, Texans will lose the federal deductibility of our sales taxes. Fortunately, U.S. Sen. Kay Bailey Hutchison last week introduced a measure to make the deductibility a permanent fixture in the federal tax code.
For years Texas was essentially penalized for not having an income tax. Residents of states with income taxes could deduct the income taxes they paid. But in Texas, since we have wisely avoided the income tax, we couldn’t deduct our primary state revenue source.
A few years ago, Congress adopted a temporary provision allowing for the deduction of either the state’s sales tax or income tax. That provision will expire next year and we return to the bad old days.
Hutchison introduced an amendment to make the deduction permanent, noting the “fundamental issue of fairness.”
According to the Texas Comptroller, the sales tax deduction saves Texans a projected $1.2 billion a year or an average of $520 per filer claiming the deduction. The Comptroller also estimates that continuing the deduction is associated with 15,700 to 25,700 jobs and over $1.1 billion in gross state product.