Congress has passed the sales tax deduction bill, which should be signed into law shortly.
Texans will be allowed to deduct state and local sales tax payments from their federal income taxes for the next two years under legislation approved Monday and sent to President Bush.
The tax break — which is likely to affect about one-fourth of Texans — is part of a corporate tax bill the Senate approved before adjourning until after the Nov. 2 elections.
Also cleared by the Senate was a bill providing $14.5 billion in disaster relief for Florida, a vote-rich state hit by four hurricanes this year, and several farm states being wooed by presidential and congressional candidates.
The two bills were approved last week by the House, which adjourned Friday so members could go home for the final three weeks of the campaigns. Lawmakers are expected to return in November to work on unfinished spending bills for the 2005 budget year, which began Oct. 1.
The tax bill cleared the Senate 69-17, with 13 senators not voting and one voting present. It gives American businesses about $136 billion in tax breaks over the next decade. It is the fifth major tax bill of the Bush administration.
Obviously, this will benefit me, since we do itemize our taxes. Too bad about the deficit, though. I’m sure someone will eventually come along and do something about it.
Pushed by Sen. Kay Bailey Hutchison, Rep. Kevin Brady and House Majority Leader Tom DeLay, all Texas Republicans, the provision would save Texas families an average of $310 a year if they itemize deductions on their federal tax returns.
“This is going to be welcome news for people who have had this inequity since 1986,” Hutchison said.
The deduction will be good for sales taxes on purchases only during 2004 and 2005. Unless Congress intervenes, the deduction will expire Jan. 1, 2006.
Taxpayers wanting to take advantage of the deduction will have to keep receipts of sales tax payments or rely on a federal tax chart of allowable deductions based partly on income and number of dependents. Only taxpayers who itemize expenses can claim the deduction.
“Most Texas families gain nothing from this change,” said Dick Lavine, a senior fiscal analyst at the Center for Public Policy Priorities in Austin.
Federal tax data indicate that of the 9.2 million returns filed by Texans in 2001, the most recent available, less than 2.1 million itemized deductions, and most of those are in the income brackets over $75,000 a year.
Among Texans with incomes under $30,000 — or about half the state’s tax filers — about 5 percent itemize their deductions.
Lavine said that to benefit from the new deduction, a family would have to accumulate mortgage interest, property taxes or other deductible expenses totaling more than $9,700, which is the standard deduction for couples filing jointly.
“Most Texas families don’t do that now and wouldn’t even with the new deduction,” he said.
More on that here and here. The CPPP’s analysis of the bill is here.
“I’m sure someone will eventually come along and do something about it.”
I believe your wife just gave birth to the “someone” not too long ago.
On one hand, from the standpoint of fairness to state taxpayers, it makes sense.
But in reality, I don’t think the federal government should be in the business of subsidizing state government. And if state lawmakers really wanted to bring “tax fairness” to Texas taxpayers, they could have sought to replace the sales tax with a revenue-neutral income tax. So much for those “smaller government” legislators who want a federal solution to a problem the state could have solved for itself.
For Greg
Just hope there’s going to be enough money in the till for the housing bubble bust – biggest bailout in history…No chance for “balanced budget” – pork rules