[Congressional Record Volume 157, Number 10 (Tuesday, January 25, 2011)]
[Senate]
[Pages S186-S187]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. HUTCHISON (for herself, Mr. Begich, Mr. Barrasso, Mr. 
        Cornyn, Mr. Alexander, and Mr. Thune):
  S. 80. 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

[[Page S187]]

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 has a significant impact on Texas. According to the 
Texas Comptroller, extending the deduction would save Texans a 
projected $1.2 billion a year, or an average of $520 per filer claiming 
the deduction. The Texas Comptroller also estimates continuing the 
deduction is associated with 15,700 to 25,700 Texas jobs and $1.1 
billion to $1.4 billion in gross state product.
  Recognizing the inequity in the tax code, Congress reinstated the 
sales tax deduction in 2004 and authorized it for 2 years. Congress 
further extended the sales tax deduction in 2006 and 2008, 
respectively. On January 1, 2010, however, the sales tax deduction 
expired, and, for much of this past year, many Americans once again 
faced the prospect of paying Federal income taxes on their State and 
local sales taxes.
  Fortunately, under the recent agreement to extend the broader tax 
relief for all Americans, Congress staved off the return of the sales 
tax deduction by extending it for 2 years, retroactive to January 1, 
2010. However, this deduction is only in effect through 2011, 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. I hope 
my fellow Senators will support this effort and pass this legislation, 
and I appreciate the backing of Senators Barrasso, Begich, Cornyn, 
Alexander, Enzi and Thune who have already signed on as co-sponsors.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 80

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. PERMANENT EXTENSION OF DEDUCTION FOR STATE AND 
                   LOCAL GENERAL SALES TAXES.

       (a) In General.--Subparagraph (I) of section 164(b)(5) of 
     the Internal Revenue Code of 1986, as amended by section 722 
     of the Tax Relief, Unemployment Insurance Reauthorization, 
     and Job Creation Act of 2010, is amended by striking ``, and 
     before January 1, 2012''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     2011.
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