Obey Warns That Benefits of Tax Reform Proposal Vastly Outweighed by Billion Dollar Tax Hit to WI Taxpayers

Obey warns that benefits of tax reform proposal vastly outweighed by billion dollar tax hit to Wi taxpayers

WASHINGTON, D.C. - Today, as part of their broad tax simplification proposal that includes the elimination of the Alternative Minimum Tax (AMT), the President's Advisory Panel on Tax Reform officially recommended eliminating the ability of taxpayers to deduct on their federal tax return the amount of taxes they have already paid to state and local governments.

For Wisconsin taxpayers that recommendation would result in double taxation and would have the effect of taking an additional billion dollars out of Wisconsin taxpayers' pockets.

Seventh District Congressman Dave Obey (D-WI), who has called this scheme "an incredible rip-off by western and southern oil and gas producing states at the expense of northern snowbelt states," warned that, while the failure to tie the AMT to inflation is creating a growing headache for middle-income tax payers across the country, "simply wiping out the AMT and paying for it by eliminating the state and local tax deduction would make the problem far worse for Wisconsin taxpayers with a billion dollar tax increase."

"This is a classic bait and switch and we must not fall for it," Obey added.

The deduction for State and local taxes is the second largest itemized deduction claimed on Federal tax returns. Repeal of the deduction could result in a tax increase for 780,000 Wisconsin taxpayers and make it more difficult for state and local government to finance important government services such as education, law enforcement and transportation. While those who support eliminating this deduction argue that it only benefits large states like New York and California, the facts show that millions of taxpayers across the country use this deduction.

Obey said that only a handful of states would be hit harder than Wisconsin and Minnesota under this proposal. "States like Texas have no state income tax because their budgets are supported by oil and gas revenue which snowbelt taxpayers pay every time we buy natural gas, gasoline or home heating oil. So this proposal clobbers us and doesn't lay a glove on them. States like Wisconsin have no oil, gas or coal to sell so we have to rely on state income and sales taxes. That means that if Wisconsin loses that state tax deduction, Wisconsin taxpayers would be paying taxes on the same money twice, once when they pay their state taxes and again when they lose their federal tax deduction for those state taxes."

"We can all agree that the tax code should be as simple and fair as possible, but making Wisconsin taxpayers pay so that taxpayers in Texas and Wyoming can save is completely unacceptable," Obey concluded.

http://obey.house.gov/HoR/WI07/Newsroom/Press+Releases/Obey+warns+WI+taxpayers+about+tax+reform+proposal.htm