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Press Release of Senator Cantwell

Cantwell, Rubio, Nelson Lead Bipartisan Effort to Extend State Sales Tax Deduction

In letter to Senate, Finance Committee leadership, 14 Senators issue bipartisan call for tax fairness

Friday, February 03,2012


WASHINGTON, D.C. – Today, U.S. Senators Maria Cantwell (D-WA), Marco Rubio (R-FL), Bill Nelson (D-FL) and 11 other Senators from both parties urged Senate and Finance Committee leadership to make extending the state and local sales tax deduction a top priority this legislative session. The deduction, which expired at the end of 2011, provides tax fairness to residents of eight states without an income tax.

In a letter sent yesterday to Senate Majority Leader Harry Reid, Senate Minority Leader Mitch McConnell, Senate Finance Committee Chairman Max Baucus, and Senate Finance Committee Ranking Member Orrin Hatch, the 14 Senators called for an extension of the state and local sales tax deduction as part of a tax extenders package.

In addition to Senators Cantwell, Rubio and Nelson, the letter was also signed by Senators John Cornyn (R-TX), Mike Enzi (R-WY), John Thune (R-SD), Lamar Alexander (R-TN), Kay Bailey Hutchison (R-TX), John Barrasso (R-WY), Mark Begich (D-AK), Bob Corker (R-TN), Dean Heller (R-NV), Tim Johnson (D-SD) and Lisa Murkowski (R-AK).

Taxpayers in Alaska, Florida, Nevada, Tennessee, Texas, South Dakota, Washington and Wyoming benefit from this deduction. In 2009, the most recent year for which official data is available, taxpayers deducted less than $16 billion in state and local sales taxes, a small fraction compared to the $236 billion in state and local income taxes deducted on federal returns. But for taxpayers in these eight states, this deduction helps reduce their taxable incomes by billions of dollars a year.

“As you’re aware, taxpayers in our states – Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming – benefit from  this common-sense deduction,” the Senators wrote in the letter today. “In this time of economic uncertainty, it is especially important to make sure our constituents can utilize consistent, predictable deductions that they can plan around.We urge you to make extending the state and local sales tax deduction a top priority when the Senate returns later this month.

“As a tax extenders package is considered in the Senate, we urge you to ensure that our constituents aren’t losing their hard-earned income because of an unfair section of the tax code,and to help pass an extension of the state and local sales tax deduction as soon as possible,” the Senators continued. “More importantly, we must continue working toward making sure that states without an income tax are permanently afforded the same treatment in the federal tax code as states with an income tax.”

The itemized deduction allows taxpayers in states without an income tax to deduct the sales taxes they pay in 2011 on their upcoming federal income tax returns. The federal income tax deduction for state and local sales taxes is available for 2011 tax returns but its future remains unclear for future tax years.

For nearly two decades, taxpayers in each of the eight states without an income tax were penalized because the federal tax code did not allow deduction of state and local sales taxes. That disparity ended in 2004 when Congress successfully restored the deduction. For the first time since 1986, taxpayers in states that had no state income tax were able to deduct sales taxes from their federal income tax. But the extension was never made permanent, requiring repeated approval by Congress.

February 2, 2012

Senate Majority Leader Harry Reid

522 Hart Senate Office Building

Washington, D.C. 20510

Senate Minority Leader Mitch McConnell

317 Russell Senate Office Building
Washington, D.C. 20510

Dear Majority Leader Reid and Republican Leader McConnell:

As you know, the deduction for state and local sales taxes expired at the end of 2011 and will therefore not be in effect for the 2012 tax year unless Congress acts. As you’re aware, taxpayers in our states – Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming – benefit from  this common-sense deduction. In this time of economic uncertainty, it is especially important to make sure our constituents can utilize consistent, predictable deductions that they can plan around.We urge you to make extending the state and local sales tax deduction a top priority this legislative session.

This issue is a matter of fairness. Taxpayers in states with an income tax can deduct their state and local income taxes from their federal income.  Our states have elected to use sales taxes rather than income taxes to finance government services.  The ability to deduct state and local sales taxes helps level an uneven playing field.  In 2009, the most recent year for which official data is available, taxpayers deducted less than $16 billion in state and local sales taxes, a small fraction compared to the $236 billion in state and local income taxes deducted on federal returns.   Taxpayers in our states already bear a disproportionate share of the federal tax burden, which should not be worsened by Congressional failure to extend the state and local sales tax deduction.

For nearly two decades, taxpayers in our states were penalized because the federal tax code did not allow them to deduct state and local sales taxes. This disparity ended in 2004 when Congress successfully restored the deduction as part of the American Jobs Creation Act. The deduction helps taxpayers in our states and stimulates economic growth by drawing in new businesses, creating jobs, and keeping more money in the state.

As a tax extenders package is considered in the Senate, we urge you to ensure that our constituents aren’t losing their hard-earned income because of an unfair section of the tax code, and to help pass an extension of the state and local sales tax deduction as soon as possible. More importantly, we must continue working toward making sure that states without an income tax are permanently afforded the same treatment in the federal tax code as states with an income tax.

We look forward to working with you on this critical issue to our nation’s economy.

Sincerely,

MARIA CANTWELL                     

MARCO RUBIO                           

BILL NELSON

JOHN CORNYN                               

MIKE ENZI                               

JOHN THUNE

LAMAR ALEXANDER           

KAY BAILEY HUTCHISON              

JOHN BARRASSO

MARK BEGICH                            

BOB CORKER                                       

DEAN HELLER

TIM JOHNSON

LISA MURKOWSKI                                                                                      

Cc:

Senate Finance Committee Chairman Max Baucus

511 Hart Senate Office Building
Washington, D.C. 20510

Senate Finance Committee Ranking Member Orrin Hatch

104 Hart Senate Office Building
Washington, D.C. 20510

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