More Nevadans using sales tax deduction

WASHINGTON -- A growing number of Nevadans are taking advantage of an offer from Uncle Sam to write off a part of the taxes they pay on their store purchases.

Taxpayers in the Silver State saved $574.7 million by claiming the federal tax deduction for state and local sales taxes on their 2005 returns, according to the most recent information available from the Internal Revenue Service.

That is almost 14 percent more money than was returned to residents in 2004, the first year the tax break was revived by Congress.

According to the IRS, 346,612 Nevadans filed for the deduction in 2005, an increase over the year before when 327,532 taxpayers sought the refund.

"There was a huge increase in the number of people buying new houses and then furnishing those places," said Carole Vilardo Nevada Taxpayers Association president.

"You also had a very large number of car incentives," Vilardo said. "Car sales were up tremendously."

Vilardo said the government figures suggested that Nevadans were making large purchases in 2005 before the state's economy entered a slowdown.

She said she expects that federal returns for 2006 and for this year will show smaller sales tax deductions.

"(It) is going to reflect the economic downturn we are seeing now," she said.

The deduction was created for residents of Nevada and seven other states that do not have state income taxes. Lawmakers in the states demanded an alternative write-off as a matter of equity.

"It is not fair that states that have income taxes have a deduction, while those that have sales taxes can't deduct for it," said Susan Weihrich, an associate professor at Seattle University.

Washington, Alaska, Florida, South Dakota, Tennessee, Texas and Wyoming are the other states that do not have income taxes.

The sales tax deduction has not been made permanent, and its renewal comes before Congress every several years. One bill that passed the House last week would renew it until the end of 2008.

Stephen Miller, chairman of the economics department at the University of Nevada, Las Vegas said the deduction has had positive effects on the Nevada economy.

People tend to spend their tax savings, Miller said, leading to a bump in state revenues.

"If you assume all of the (deductions) are spent, then the effect on state revenue would be in the neighborhood of $40 million. Out of the whole (state) budget, that is not a huge number," he said.

Sen. Harry Reid, D-Nev., the Senate majority leader, said this week he will look to call for a Senate vote by the end of the year on the legislation extending the sales tax break.

Sen. John Ensign, R-Nev., declared the tax break a "priority for me," and is co-sponsoring two bills that would make it permanent.

Reps. Jon Porter and Dean Heller, both R-Nev., and Shelley Berkley, D-Nev., also are co-sponsoring bills to make the deduction a part of the code.

Porter said the tax break ensures "that Nevada's taxpayers are treated equitably," and Berkley said the deduction should be made a "permanent choice" for Nevadans.

Contact Stephens Washington Bureau reporter Jason C. Green at jgreen@stephensmedia.com or (202) 783-1760.