In an effort to provide fairness to residents of states without an income tax, U.S. Senators Mark Begich (D-Alaska) and Lisa Murkowski (R-Alaska) are joining a call to make extending the state and local sales tax deduction a top priority on Capitol Hill. The deduction, which expired at the end of 2011, gives tax fairness to residents of eight states without an income tax.
"As a tax extenders package is considered in the Senate, we urge you to ensure that our constituents aren't losing their hard-earned income because of an unfair section of the tax code, and to help pass an extension of the state and local sales tax deduction as soon as possible," the Senators write in a letter to leaders of the Senate and Finance Committee. "More importantly, we must continue working toward making sure that states without an income tax are permanently afforded the same treatment in the federal tax code as states with an income tax."
The itemized deduction allows taxpayers in states without an income tax to deduct the sales taxes they paid in 2011 on their upcoming federal income tax returns. The federal income tax deduction for state and local sales taxes is available for 2011 tax returns, but its future is unclear for future tax years.
Taxpayers in Alaska, Florida, Nevada, Tennessee, Texas, South Dakota, Washington and Wyoming benefit from the deduction, In 2009, the most recent year data is available, taxpayers deducted less than $16 billion in state and local sales taxes, a small fraction compared to the $236 billion in state and local income taxes deducted on federal returns.