Plan would mean tax break for Nevadans

Suzanne Struglinski

Tuesday, Oct. 5, 2004 | 11:01 a.m.

WASHINGTON -- Congress is close to completing a deal that would allow Nevadans to deduct sales taxes on their federal tax returns.

House and Senate negotiators are finalizing a corporate tax bill this week, and the latest version, introduced Monday by House Ways and Means Committee Chairman Bill Thomas, R-Calif., contains a provision that would allow residents in states without an income tax to deduct sales tax.

Under the change, all federal taxpayers who itemize their returns would be eligible to deduct either their state income tax or total annual sales tax on their federal return.

This would give a new deduction to Nevadans and residents of six other states that do not have an income tax but do have sales taxes. Currently, residents of states with an income tax can deduct that tax from their federal return.

Rep. Brian Baird, D-Wash., who has been pushing for the measure for several years, said he was "95 percent confident" that the measure would be approved and signed by the president.

The provision as it stands now would extend the deduction through Dec. 31, 2005, according to the committee. Taxpayers could claim the deduction on their 2004 and 2005 returns.

Estimates from those who support the new deduction say taxpayers could save between $300 and $600 a year each.

Estimates are hard to pinpoint for individual taxpayers, as it will vary from tax bracket to tax bracket, but Nevada Democratic Rep. Shelley Berkley's office estimates if the change had been approved in 2000, Nevada taxpayers would have saved $212 million.

The House originally approved the deduction but the Senate tax bill did not include it. Berkley voted against the bill because she objected to other provisions in the bill, but she said she supports the deduction.

Rep. Jim Gibbons, R-Nev., and Rep. Jon Porter, R-Nev., support the deduction and voted for the bill.

"It's great news for the taxpayers of Nevada," Gibbons' spokeswoman Amy Spanbauer said.

Spanbauer said the provision is in a large bill that addresses several major issues including international tariffs through the World Trade Organization and tobacco that need to be resolved in the conference meetings.

Porter said he was "hopeful that the final conference report will include language that will allow all Nevadans to reap the benefits of deducting their sales tax."

Berkley's spokesman said she would have preferred that a permanent deduction pass through a separate bill that she could support.

Until 1986 taxpayers could deduct state sales tax on their federal return, but Congress changed the law as part of the Reagan tax reform, and since then lawmakers in affected states have wanted to change it back.

The congressional Joint Committee on Taxation has estimated the measure would cost $3.6 billion over the two years.

Other states that would be affected by the bill are Washington, Florida, South Dakota, Tennessee, Wyoming and Texas.