Senator Estes Encouraged by Progress on Restoring Sales Tax Deduction
- Change Could Impact Debate on Public School Finance and Tax Reform -
AUSTIN, TX -- State Senator Craig Estes (R-Wichita Falls) applauded recent actions by his colleagues in Washington to restore the ability of Texans to deduct sales taxes from their federal income tax returns -- a measure which parallels the bill Estes passed during the last regular session of the Texas Legislature.
Estes pushed hard for the change during the 78th Texas Legislature as author of Senate Concurrent Resolution 1, signed by Governor Rick Perry, memorializing the U.S. Congress to restore the federal income tax deductibility of state and local sales taxes which was eliminated by federal lawmakers in 1986. In a display of bipartisan unanimity, Estes' bill was co-authored by all 30 of his Texas Senate colleagues during the 2003 regular session.
"The federal government's income tax system is unfair. It discriminates against Texans because we do not have a state income tax," Estes said. "The goal of my legislation was to push Congress to recognize this problem and fix it so Texans will be paying their fair share of the burden of federal government."
Residents of 41 states can deduct state income taxes from their federal income tax returns; however, Texas is one of seven states with significant sales taxes but no state personal income taxes. The Texas Comptroller's Office estimates the deduction could save $310 in federal taxes for the average Texas family which itemizes its federal tax return.
Efforts of the U.S. Congress to correct this inequity advanced this week with approval by members of the House-Senate Conference Committee to include enabling language in the American Jobs Creation Act of 2004 (H.R. 4520/S. 1637). Its progress continued Thursday night with passage by the U.S. House of Representatives. The U.S. Senate is expected to pass the bill Friday or Saturday.
Estes credited this week's success to a decade of work by U.S. Senator Kay Bailey Hutchison (R-Texas), U.S. Congressman Kevin Brady (R-The Woodlands) and House Majority Leader Tom Delay (R-Sugar Land).
"My colleagues in Washington played pivotal roles in attaching the sales tax provision to the federal jobs bill," Estes said.
In addition to the tax savings for Texans, Estes said restoration of the sales tax deduction could impact the current debate on public school finance and tax reform which he said would be the main challenge awaiting members of the Texas Legislature when they convene for the 79th Regular Session beginning Jan 11, 2005. Various plans propose a small increase in the sales tax rate increase and a broadening to include some services as a source of additional revenue for public schools.
"It stands to reason that state legislators and taxpayers alike might be more inclined to support slightly higher and somewhat broader sales taxes if they can be deducted from our federal tax returns," Estes said.
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