Sales Tax Deduction

Texas residents can deduct the money they spend on state sales taxes, but only for another year. Lawmakers are trying to make the deduction permanent, but their efforts keep getting thwarted. Matt Laslo reports from Washington.

Most states raise money through an income tax, residents can then deduct that money from their federal taxes. Texas is one of seven states that raise revenue through a sales tax with no income tax. Every year lawmakers from those seven states fight to get permanent sales tax deductions. Republican Senators blocked an extension of the deduction in December. They say proposals to pay for the deduction amount to a tax increase. Texas Republican Senator John Cornyn opposed his party on this issue.

"I think it's a source of revenue that they want to spend elsewhere. If you don't get to deduct your sales tax that means more federal revenue you can spend on bigger government and more programs elsewhere."  

Texas residents can still deduct their state sales taxes on their 2007 returns. But unless Congress acts, residents won't be able to deduct that money in 2008.

From Capitol News Connection in Washington, I'm Matt Laslo, Houston Public Radio News