WASHINGTON, D.C. – As part of the Senate’s debate on the Fiscal Year (FY) 2010 Budget, U.S. Sen. Kay Bailey Hutchison (R-TX), Texas’ senior Senator, introduced two amendments to provide tax relief to millions of Texas families by permanently extending the sales tax deduction and eliminating the marriage penalty in the FY 2010 Budget and future legislation.
Sen. Hutchison’s sales tax deduction amendment would prevent future tax increases on Texas families by allowing for the permanent deduction of state and local sales taxes. Texas is one of eight states that impose sales taxes in lieu of income taxes. Congress has extended the sales tax deduction every few years, but the provision will expire at the end of 2009.
“The sales tax deduction is a fundamental issue of fairness. The people of Texas and citizens of other affected states should not be held to a higher standard than taxpayers in other states, especially when dealing with tax relief that ultimately pays for itself,” said Sen. Hutchison. “My amendment will permanently end the discrimination suffered by taxpayers who do not have the option of an income tax deduction.”
According to the Texas Comptroller, the sales tax deduction saves Texans a projected $1.2 billion a year or an average of $520 per filer claiming the deduction. The Comptroller also estimates that continuing the deduction is associated with 15,700 to 25,700 jobs and over $1.1 billion in gross state product.
Recognizing the inequity in the tax code, Sen. Hutchison has consistently led efforts in Congress to reinstate this deduction. Before 1986, taxpayers had the ability to deduct their sales taxes. Unfortunately, citizens of some states were treated differently after 1986, when the deduction for state and local taxes was eliminated. Sen. Hutchison, along with U.S. Representative Kevin Brady (R-TX), successfully reinstated a two year state sales tax deduction in 2004, which was extended in 2006 and again in 2008. Presently, the sales tax deduction is set to expire at the end of 2009.
Additionally, Sen. Hutchison introduced an amendment to establish a point of order against any legislation which would impose or increase a marriage penalty. The marriage penalty pushes married couples into a higher tax bracket than two unmarried single wage earners living together and taking in the same combined income. After years of fighting this unfair tax policy, Congress has made import strides toward eliminating the marriage penalty by lowering tax rates, doubling the standard deduction, and simplifying other elements of the tax code.
“The benefits of marriage are well established; yet, without marriage penalty relief, the tax code provides a significant disincentive for people to walk down the aisle. Marriage is a fundamental institution in our society and should not be discouraged by the IRS,” said Sen. Hutchison. “My amendment would affirm this body’s commitment to the institution of marriage by prohibiting any legislation that would impose a marriage penalty.”
Before these provisions were changed, 42% of married couples paid an average penalty of $1,400. Unfortunately, current marriage penalty relief is only in effect through 2010. In January, Sen. Hutchison introduced the Permanent Marriage Penalty Relief Act of 2009 to permanently ban the provision.