Senators push to extend sales tax deduction

WASHINGTON – With just weeks remaining in Congress, bands of lawmakers are pushing their leaders in a last-ditch bid to reinstate the federal tax break for sales taxes, a deduction popular in Nevada and a handful of other states.

Some 314,345 Nevadans claimed the sales tax deduction on their 2010 federal returns, totaling $449.4 million in write-offs, according to the Internal Revenue Service.

The scenario is repeated in eight other states that do not levy a state income tax or have only a limited income tax. The sales tax deduction was re-enacted in 2004 to give their taxpayers the same kind of benefit as taxpayers who can deduct state income taxes on their returns to Uncle Sam.

Problem is, the sales tax deduction was made only temporary, making it necessary for its backers to have it renewed every few years.

The latest version expired at the end of 2011, adding urgency for lawmakers who believe they need to act now to reinstate it retroactively for 2012 so the benefit can continue uninterrupted.

“We face many tough decisions in the next few weeks. The extension of the state and local sales tax deduction should not be one of them,” Sen. Kay Bailey Hutchison, R-Texas, wrote last week to Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky.

Because the deduction expired at the end of 2011, “over 10 million Americans are at risk of losing the ability to deduct state and local sales taxes for the 2012 tax year,” Hutchison wrote.

Also signing the letter were senators from Washington, Wyoming, Florida, South Dakota, Tennessee and Sen. Dean Heller, R-Nev.

Heller “supports the extension of the state sales tax deduction and will continue to work to ensure its inclusion in any year-end package,” spokesman Stewart Bybee said Friday.

Five dozen House members from the affected states made a similar pitch in September to their leadership.

A bill that passed the Senate Finance Committee in August would extend the sales tax deduction for two years, 2012 and 2013.

That means Nevadans filling out their returns next April would be able to write off sales taxes they paid on purchases made this year and would be assured the deduction would remain in effect on things they buy next year as well.

The Senate bill also would renew dozens of other targeted tax breaks that have expired or are expiring, at an estimated cost of $205 billion.

But the “tax extenders” bill has been stalled and is being wrapped into big-picture negotiations over the impending “fiscal cliff.”

House and Senate leaders are negotiating to avoid the combination of tax increases and deep automatic spending cuts that are scheduled to go into effect early in the new year.

It is thought there is a good chance the sales tax deduction would be included in any final deal, particularly because Reid, who is known to support it, is involved in the fiscal cliff negotiations.

Contact Stephens Washington Bureau Chief Steve Tetreault at stetreault@stephensmedia.com or 202-783-1760. Follow him on Twitter @STetreaultDC.

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