Washington, D.C. - In a major economic boost for Texas, U.S. Congressman Kevin Brady (R-The Woodlands) -- leader of the fight in Washington to restore sales tax deductibility to the federal income tax code -- won a major victory when the measure was  included in a high-profile international tax bill (America Jobs Creation Act, H.R. 4520) introduced today by Ways & Means Chairman Bill Thomas (R-CA).

 

Brady, a member of the Ways & Means Committee, has been focused on this provision constantly for the past three years. He is author of the Sales Tax Equity Act, H.R. 720 with 78 co-sponsors, which restores the deductibility of state and local income tax from federal taxes that was eliminated in 1986.

 

Taxpayers are currently permitted to deduct their state and local personal income taxes, leaving seven states, including Texas, Florida, Tennessee, Wyoming, Washington, South Dakota and Nevada, which rely upon sales tax, out in the cold.

 

Under the measure introduced by Thomas, taxpayers in every state will have the option of deducting the higher of their state and local personal income tax or sales tax. Taxpayers will be able to choose from a table of average sales tax deductions or provide receipts - which is likely in years with purchases of automobiles, boats, furniture and other high-ticket household items. The $3.6 billion provision will sunset in 2006, which Brady says is a significant step forward after 18 years without deductibility.

 

“This is a huge economic boost for Texas, where taxpayers will save nearly $921 million a year, and it’s also an issue of fairness for states like ours. The tax code shouldn’t be biased in favor of income taxes”, said Brady, a former state legislator. 

 

Brady credits House Majority Leader Tom DeLay with playing the pivotal role in attaching the sales tax provision to the jobs bill.

 

“Tom Delay is determined to see fairness for sales tax states, which is great news for Texas taxpayers,” said Brady.

 

The Texas State Comptroller’s Office estimates sales tax deductibility would create over 16,000 new jobs, $590 million in new investments, and $874 million in increased gross state product.  Strayhorn also estimates that an average Texas family of 4 would save nearly $300 a year.  Other states could be expected to benefit comparably.