Congressman Marsha Blackburn (TN-7), today formally proposed an idea she floated on CNN's Late Edition in November; allow taxpayers to deduct their state income tax and their state and local sales taxes from their federal income tax. The "State and Local Sales Tax Deduction Expansion Act of 2008" will make this possible.
Since 1986, residents of 41 states that have both a state income tax and state or local sales tax have been unable to deduct both from their federal income tax. House Ways and Means Chairman, Charlie Rangel, stated on the same CNN program that all such proposals were worth considering (transcript and video are linked on this page). In the nine states, including Tennessee, that do not have a state income tax and are able to deduct their state sales tax; residents save an average of $650 per year.
"My proposal will take a big step toward relieving taxpayer pressure caused by thefinancial crisis. It rewards pressed taxpayers for purchasing necessities and it encourages those who can afford it to make major purchases, like new cars. State and municipal governments are experiencing budget shortfalls across the country because sales tax revenues are on the decline. My proposal will offset that decline. If a consumer is on the fence about making a big purchase, the knowledge that some of that cost will come back to them in the form of a tax deduction will encourage them to spend."
Rep. Blackburn is available tomorrow, December 5th, for interviews on her proposal.
Blackburn's proposal to her colleagues is, along with a chart that demonstrates what a 1040 Schedule A form would look like after the "Sales Tax Deduction Expansion Act" is passed are linked on this page.