Sales-Tax Deduction No Excuse for Raising Sales Tax

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Dick Lavine /(512) 320-0222 x 101

September 7, 2006

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The U.S. Congress may soon renew a provision that allows taxpayers to deduct their state and local sales tax payments from their federal taxes. Some claim that this provision would make the sales tax a more attractive source of state revenue because people would be able to write it off. In reality, only one-fifth of Texas families use the current sales-tax deduction, so most Texans would save absolutely nothing from its proposed extension. If the Legislature were to raise the sales-tax rate to help cover the cost of property tax cuts passed in the recent special session, most Texans would only see a higher sales tax – not an increase in their federal income tax deductions.