Congress Still Has It Wrong on Sales Tax Deduction
Do you remember when taxpayers could deduct both state income tax and state sales tax on the federal Schedule A? It has been a long time, so you youngsters out there may not remember.

When Congress repealed it almost twenty years ago, taxpayers in states like Tennessee, Texas, and Florida were at a disadvantage since their states collected most of their funds via sales tax rather than state income tax.

Deduction Reinstated…But Incomplete
With the enactment of The American Jobs Creation Act of 2004, Congress partially reinstated the sales tax deduction. While taxpayers can now choose once again to deduct sales tax, they can only deduct one - either the sales tax or state income tax, not both.

Deduction Unfair for Many Taxpayers
The result is that taxpayers in sales tax ONLY states and income tax ONLY states have an advantage over states where the taxpayers are burdened equally with both taxes. For example, consider three taxpayers who all itemize their deductions and have a total of $1,000 in state taxes paid.

Taxpayer A (pays only sales tax)
Sales Tax = $1,000
State Income Tax = $0
Schedule A Deduction = $1,000

Taxpayer B (pays only state income tax)
Sales Tax = $0
State Income Tax = $1,000
Schedule A Deduction = $1,000

Taxpayer C (pays both sales tax and state income tax)
Sales Tax = $500
State Income Tax = $500
Schedule A Deduction = $500

Congress needs to take the next step and make the deduction equitable for all taxpayers. Let taxpayers deduct BOTH sales tax and state income tax. It’s only fair. ‚

From April 2005