If it passes, it would eliminate one objection to shifting our tax burden away from property taxes and more toward sales taxes, as was discussed during the recent special session on school finance.

However, if sales taxes are more regressive than property taxes, as seems likely, then such a shift would still make Texas' tax structure more regressive overall, so it still sounds like a bad idea to me.

An unmentioned side effect of making sales taxes deductible is that it'd make them even more regressive, since the higher your tax bracket, the lower your net sales tax rate! A fairer approach would be to provide an income tax credit of, say, 10% of sales taxes paid. But don't expect such an idea to emerge from the DeLay-controlled House any time soon.

Incidentally, Strayhorn claims that "An average Texas family that itemizes tax deductions would see an extra $310 each year...." [Emphasis added.] CPPP doesn't "dispute" that; they merely emphasize the important point that most Texas families don't fall into that category.

I still have one question about the House-passed provision: does it apply to all states, or only to those states with no state or local income taxes? If the latter, it would seem to discriminate against those states with low income taxes, since they'd be better off whether they raised their income tax and eliminated their sales tax or vice versa.

Incidentally, Strayhorn claims that "An average Texas family that itemizes tax deductions would see an extra $310 each year...." [Emphasis added.] CPPP doesn't "dispute" that; they merely emphasize the important point that most Texas families don't fall into that category.

Correction noted. Thanks!

I still have one question about the House-passed provision: does it apply to all states, or only to those states with no state or local income taxes?

Only to states with no state income tax. I believe that covers a half-dozen or so states, and I believe reps from each of those states favored this bill.

This is fascinating. The two things that occur to me immediately are

1) Isn't the accounting going to be terrible for tracking your sales tax during the year? Surely you would need to keep a receipt for every taxable purchase and add them all up to achieve the Strayhorn savings. Since the only people who are likely to do that are the ones with accountants, it doesn't seem like people are really going to see any significant savings in those years in which they don't buy a car or some other big-ticket item.

2) When we lived in Austin sales tax was, IIRC, 8.25%. Now we live in PA and sales tax is (Hmmm, I don't know, but I have a receipt) $0.33 on $4.65, which is 7.09%. So with rounding, I suppose it is either 7% or 7.25%, but we have state and municipal income tax as well. Somehow we don't seem to be saving much in sales tax over TX, but are apparently excluded from a sales tax writeoff. Since only about 5 states don't have income tax, this proposal seems a little out of whack.

1) The provision would allow taxpayers to choose whether to deduct state sales taxes or state income taxes from their federal taxable income. Because the income tax would almost always be the greater deduction in states that levy income taxes, the proposal is designed particularly to benefit taxpayers who itemize deductions in the seven states that do not have income taxes, but do have sales taxes -- and to gain support for the corporate tax bill from members of Congress from those states. Those states are Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.

2) The deduction would be calculated from a table prepared by the IRS. The old deduction, which was repealed in 1986, also allowed you to save your receipts to prove a higher amount, but the new proposal does not permit this.

For a detailed analysis, go the the Center on Budget and Policy Priorities: http://www.cbpp.org/6-8-04tax.htm

To hell with income tax! Every communist, Marxist, socialist, IRS agents, and supporters of income tax should buy a copy of Karl Marx's Communist Manifesto and shove it up their buttocks! The income tax must be abolished NOW! The federal government officials have used income tax to oppress fellow Americans, suppress dissent, eliminate their opponents, establish poverty, and destroy our freedoms and our property. Ever since income tax was "legalized" by 16th Amendment, Democrats and Republicans in Washington D.C. have engaged in racketeering, extortion, robbery, fraud, and grand theft against we the people.

Every Americans should boycott income taxes once and for all. We should dump income tax forms into the ocean. Also, we should never report how much money we earn to government officials; it is none of the government official's business anyway!! And we should never sign any paper that forces us to report our earnings! Finally, every American should send a strong message to IRS agents, Democrats, Republican socialists, and Marxists by desecrating the British "Union Jack" flag and Soviet "Sickle and Hammer" flag and burning the portraits of King George III, Ho Chi Minh, Josef Stalin, Vladimir Lenin, and Karl Marx on every April 15 and July 4.

Any IRS agents who want to violate our life, liberty, and property should go to Britain and kiss Charles the First's buttocks and kiss King George III's buttocks.

I heard there was some kind of sign up sheet to do away with income tax. They would just apply it to what we buy and we would get what our total income is. Is this true and if so, where can I sgn this?