Some Good News For Tennesseans On Tax Day

Frist, Alexander, Blackburn Herald First Year State Sales Tax Deductibility For Tennesseans

Posted on April 14, 2005

WASHINGTON – U.S. Sens. Bill Frist (R-TN) and Lamar Alexander (R-TN) and Representative Marsha Blackburn (R-TN) today heralded the return of state sales tax deductibility for Tennesseans on their 2004 and 2005 tax returns. This is the first time since 1986 that Tennesseans have been able to deduct their state sales taxes on their federal income tax returns. This new provision provides significant savings to many Tennessee families. The Scoby family of Nashville plans on using the refund gained from the sales tax deduction to pay down their home mortgage. In Chattanooga, Bubba and Tara Williams and their three children plan on putting the refund into their savings account. Tad and Robin Dance and their three kids recently moved to Ooltewah from South Carolina where they paid state income tax. This will be the first year that they receive a federal tax refund. Contact information for these families is available at the end of this release. “Along with tax season, this spring also brings a return of fairness to our tax code,” said Frist. “For the first time in nearly two decades, Tennesseans will no longer be unfairly penalized by our tax system. Allowing Tennesseans to deduct their state sales taxes from their federal returns empowers families, grows our economy, and is plainly the right thing to do. This is an issue I’ve been passionate about since arriving in the Senate, and I’m glad this sensible and equitable reform will mean nearly $500 in savings for almost one-quarter of Tennesseans filing their taxes for 2004. Government must stand for fairness, and the return of sales tax deductibility reflects our commitment to giving Tennessee’s families a fair shake. I’m proud of what we’ve accomplished and look forward to ensuring this provision is made permanent, so Tennesseans are guaranteed equal and fair treatment in years to come.” “Allowing state sales taxes to be deductible makes good economic sense; it’s just good common sense and it's the fair thing to do,” said Alexander. "This year it puts an average of $470 in the pockets of nearly 600,000 Tennesseans who itemize their taxes. Nationwide, state and local sales tax collections account for about a quarter of total state tax revenue, which is about the same as property taxes and income taxes. The major difference is that people who pay state and local sales taxes haven’t been able to deduct them from their federal income tax like those who pay property and income taxes since 1986. I’m proud to join Senator Frist and Representative Blackburn in this fight for tax fairness and will continue to work to make this provision permanent.” "Tax fairness is an issue Tennesseans feel passionate about," said Blackburn. "And the sales tax deduction is clearly a matter of fairness. We worked hard to restore the deduction, and today Tennesseans are benefiting. Tennessee sales tax collections were up by $14.8 million in March, business activity on our main streets is growing, and all because taxpayers are getting to keep more of what they earn. For nearly two decades restoration of the deduction failed to pass Congress, but, by working together, we were able to make this goal a reality. Majority Leader Frist, Senator Alexander, and I have already begun the effort to make this deduction a permanent part of the tax code, and I look forward to the work ahead." The state sales tax deductibility provision was signed into law by President Bush on October 22, 2004 as part of the American Jobs Creation Act of 2004. Before passage of this legislation, individuals were only permitted to deduct state income and property taxes on their federal tax returns. Seven states – Alaska, Texas, Florida, Wyoming, Washington, South Dakota and Nevada – do not have a state income tax. Two states – Tennessee and New Hampshire – only impose an income tax on interest and dividends, but not wages. Therefore, residents of these states who itemize were placed at a disadvantage simply because these states choose to raise revenue through primarily a sales tax instead of an income tax. Approximately 25 percent of Tennessee taxpayers itemize and stand to receive an average $470 in tax savings. The American Jobs Creation Act makes state sales taxes deductible for 2004 and 2005. Senator Frist and Senator Alexander are currently cosponsoring a piece of legislation which will make state sales tax deductible permanent. Contact Information: Craig and Jodie Scoby, Nashville, Tennessee, 615-889-2156 (call after 6:00 pm CDT) Bubba and Tara Williams, Chattanooga, Tennessee, 423-593-7444 Tad and Robin Dance, Ooltewah, Tennessee, 423-336-7305 (Work) or 423-238-5001 (Home)