WASHINGTON, DC – U.S. Senator Harry Reid said today that the Bush Administration’s new tax plan would unfairly burden Nevadans by taking away a deduction for state sales tax.
“No one should have to pay more in federal taxes because their state chooses to raise revenue through sales tax instead of income tax,” said Reid. “That’s a decision that should be left to the states, with no federal penalty attached. The Senate approved a sales tax deduction to level the playing field, but the Bush Administration’s new tax bill will take it away. There are a lot of reasons not to like this tax plan, but this is one of the main reasons I oppose it.”
Taxpayers used to be able to deduct both 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 – including Nevada — have no broad-based income tax. Residents of those states lost most of their tax relief for their state payments.
Congress temporarily reinstated the sales tax deduction in 2004. However, the law was only in effect for two years and expired at the end of 2005.
The Senate voted to make the state sales tax deduction permanent this year, but the provision was not included in the new House/Senate Conference Bill that’s backed by the White House.
“The Bush’s tax plan takes the country in the wrong direction,” said Reid. “It offers next to nothing for average Americans while giving away the store to multi-millionaires. The permanent sales tax deduction was one of the few good provisions of the bill, and I’m terribly disappointed that it’s not in the final version.” Reid is also sponsoring a separate bill that would make the sales tax deduction permanent. He vowed to continue working for passage of that bill.