WASHINGTON — The Texas Society of Certified Public Accountants is urging the chairmen and ranking minority members of the congressional tax-writing committees to make the deduction for state and local sales taxes permanent.
The deduction, which is made in lieu of the deduction for state and local income taxes, is one of the tax provisions that expired at the end of 2013.
Several bills in the House and the Senate would make the provision permanent. Additionally, a tax extenders bill introduced by Senate Majority Leader Harry Reid, D-Nev., would extend the deduction through calendar year 2014.
The provision is important for individuals, with about 11 million of them claiming a total of $17 billion in state and local sales tax deductions in 2011, the TSCPA said in a recent letter, citing a Pew Charitable Trusts report.
The group said that continuing to allow people to deduct sales taxes as an alternative to deducting state income taxes "would promote equity and fairness for citizens of states that still tax their citizens, but have chosen to not impose an individual income tax."
Without the deduction for state and local sales taxes, those states, including Texas, are at a disadvantage when it comes to attracting individuals and businesses, the TSCPA said. Besides Texas, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Washington and Wyoming do not tax income from wages.
"Without the deduction for sales taxes, the Internal Revenue Code is simply unfair to individuals who happen to live in states that have, for whatever reason, chosen to finance their state budgets with sales tax revenues rather than alternative sources, such as income taxes or property taxes," the TSCPA said. "It seems irrational and unfair for the code to permit a federal deduction for one type of state and local tax and disallow it for another."
The TSCPA also noted that the deduction's expiration has led to uncertainty. Many taxpayers may not be aware that the deduction expired and many be disappointed if it is unavailable. Other taxpayers may not be saving their receipts because the deduction expired and may be upset if the provision is extended and they can't take advantage of it.
In addition to urging the committee leaders to make the deduction permanent, the TSCPA asked the congressmen to think about encouraging the Internal Revenue Service to be more generous when it computes the deduction amount based on taxpayers' income.
"Our experience has been that the amount of the deduction that can be claimed without specific documentation is significantly less than the amount individuals actually pay. This requires taxpayers to retain voluminous files of sales receipts, adding greatly to the complexity and administrative inefficiency of the deduction," the letter said.
