[Congressional Record Volume 153, Number 1 (Thursday, January 4, 2007)]
[Senate]
[Page S167]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. HUTCHISON (for herself, Mr. Cornyn, Mr. Alexander, Mr. 
        Ensign, Mr. Enzi, Mr. Martinez, Mr. Thune, and Mr. Stevens):
  S. 180. A bill to provide a permanent deduction for State and local 
general sales taxes; to the Committee on Finance.
  Mrs. HUTCHISON. Mr. President, I am pleased to introduce a bill to 
permanently correct an injustice in the tax code that has harmed 
citizens in many States of this great Nation.
  State and local governments have various alternatives for raising 
revenue.
  Some levy income taxes, some use sales taxes, and others use a 
combination of the two. The citizens who pay State and local income 
taxes have been able to offset some of their federal income taxes by 
receiving a deduction for those State and local income taxes. Before 
1986, taxpayers also had the ability to deduct their sales taxes.
  The philosophy behind these deductions is simple: people should not 
have to pay taxes on their taxes. The money that people must give to 
one level of Government should not also be taxed by another level of 
Government.
  Unfortunately, citizens of some States were treated differently after 
1986 when the deduction for State and local sales taxes was eliminated. 
This discriminated against those living in States, such as my home 
State of Texas, with no income taxes. It is important to remember the 
lack of an income tax does not mean citizens in these States do not pay 
State taxes; revenues are simply collected differently.
  It is unfair to give citizens from some States a deduction for the 
revenue they provide their State and local governments, while not doing 
the same for citizens from other States. Federal tax law should not 
treat people differently on the basis of State residence and differing 
tax collection methods, and it should not provide an incentive for 
States to establish income taxes over sales taxes.
  This discrepancy had a significant impact on Texas. According to the 
Texas Comptroller, the sales tax deduction saves a family of four $310 
a year, or a total of about $1 billion each year for the State's 
residents who itemize deductions. The ability of taxpayers to deduct 
their sales taxes will lead to the creation of more than 16,500 new 
jobs and the addition of $920 million in State economic activity.
  Recognizing the inequity in the tax code, Congress reinstated the 
sales tax deduction in 2004 and authorized it for two years. Last year, 
we extended the sales tax deduction for an additional two years. As a 
result of our efforts, the 55 million of us in the eight States with a 
sales tax but no income tax are no longer discriminated against in the 
tax code. Unfortunately, the deduction is only in effect through 2007, 
and we must act to prevent the inequity from returning.
  The legislation I am offering today will fix this problem for good by 
making the State and local sales tax deduction permanent. This will 
permanently end the discrimination suffered by my fellow Texans and 
citizens of other States who do not have the option of an income tax 
deduction.
  This legislation is about reestablishing equity to the tax code and 
defending the important principle of eliminating taxes on taxes. Last 
year, the Senate voted 75-25 to instruct conferees to make this 
deduction permanent. I hope my fellow Senators will once again support 
this effort and pass this legislation.
                                 ______