Tax break for Nevadans clears hurdle

Suzanne Struglinski

Friday, June 18, 2004 | 11:25 a.m.

WASHINGTON -- Nevadans could get a new tax break if a provision in a large tax bill approved by the House Thursday becomes law.

The provision would allow taxpayers in states without a state income tax to deduct state and local sales taxes on their federal return for the next two years.

This could lead to a savings of $212 million statewide, based on estimates by the Congressional Research Services. Nevada residents paid just over $2 billion in state and local sales tax in 2000 -- about $700 million came from those who itemize their taxes, according to estimates compiled by the service earlier this month.

Depending on the tax bracket, taxpayers could save $250 to $300 in taxes, said Rep. Kevin Brady, R-Texas, although it would vary from state to state and family to family. Estimates are hard to pinpoint for individual taxpayers as it will vary from tax bracket to tax bracket. Brady was the original sponsor of the sales tax option bill that was included in the larger tax bill Thursday.

Rep. Jim Gibbons, who co-sponsored the original measure, said, "Currently residents of other states can deduct their state income tax on their federal returns. Yet taxpayers in Nevada -- where there is no income tax -- have no similar deductions. Allowing taxpayers in states like Nevada to deduct sales taxes on their federal tax returns is simply a fair solution to an inequity in our tax code."

Nevadans -- and residents of Texas, Florida, Tennessee, Wyoming, Washington, South Dakota, New Hampshire and Alaska, which also have no state income tax -- have not had this option since 1986, when Congress removed it. New Hampshire also has no sales tax, but residents of other states who pay a state income tax could choose to deduct the state tax or the sales tax under the new law.

"This levels the playing field and gives us the same tax opportunities as other states," Rep. Jon Porter, R-Nev., said.

In addition to Gibbons, Porter, Rep. Shelley Berkley, D-Nev., and 75 other House members co-sponsored Brady's original bill.

All three members support the option for Nevada, but politics have held the option from moving forward until now.

Berkley voted against the overall tax bill passed Thursday because she objected to other items in it, she said. Gibbons and Porter supported the bill.

"The good news is that after six years, there is finally a move to restore the sales tax deduction, but the awful news is that it is part of a bill that gives tax incentives for corporations to send American jobs offshore while ballooning the deficit," Berkley said.

"Rather than accept the GOP's limited two-year approach included in this bill, I support making the sales tax deduction permanent," she said. "Restoring this option will also restore fairness in the tax code for those who live in Nevada and other places where there is no state income tax."

Brady said he did not fight for a permanent tax deduction to help keep the overall cost of the bill down.

He attributed the earlier failures of getting the sales tax option on other bills to election-year politics and said a coalition of states have been working for three years to attach this to other bills.

"We've been laying the groundwork steadily, and persistence is paying off," Brady said.

If the final bill is approved, taxpayers wanting to deduct their sales tax could take an average deduction based on estimated spending related to income levels or tally up totals from receipts collected from throughout the year.

"This is a good option if someone is buying big items, they may want to use that since their paid sales tax will be unusually high," Brady said.

The Senate approved its version of the tax bill but it does not contain this sales tax option. Lawmakers will negotiate the differences between the bill before it becomes law.