Senate Approves Amendment to Make State Sales Tax Deduction Permanent

Alexander: Fairness, Hundreds of Millions of Dollars at Stake for Tennesseans

Posted on March 22, 2007

The U.S. Senate today approved an amendment cosponsored by Sens. Lamar Alexander and Bob Corker that would make permanent the deductibility of state sales taxes, saving Tennesseans hundreds of millions of dollars a year. “More than 530,000 Tennesseans received average deductions of $400 on their 2004 federal tax returns, resulting in over $200 million in tax savings,” Alexander said. “That amount has surely risen since then. Making this deduction permanent makes good economic sense and is the fair thing to do.” “This is a common sense amendment that will provide tax fairness for Tennesseans,” Corker said. “I was proud to cosponsor this amendment to make the state sales tax deduction permanent.” Nationwide, state and local sales tax collections account for about a fourth of total state tax revenue, about the same as property and income taxes. All are currently deductible, but only state and local sales taxes’ deductibility is not permanent, having most recently been extended for two years by the Tax Relief and Health Care Act of 2006. Before Congress initially made sales taxes deductibility in 2004, only income and property taxes could be deducted from federal tax returns, leaving citizens of states like Tennesssee that raise revenue primarily via sales taxes at a significant disadvantage. The amendment, sponsored by Senator Kay Bailey Hutchison (R-TX), was added by voice vote to the Budget Resolution for fiscal year 2008 now under consideration by the Senate.