CSE Supports Fair Treatment for States Without Income Taxes

On June 17, the U.S. House of Representatives approved legislation as part of the “American Jobs Creation Act of 2004” (H.R. 4520) that would create a federal tax deduction for state sales taxes for residents of states without an income tax. Currently, residents of states with a state income tax can deduct part of those taxes from their federal income tax return.

CSE President Matt Kibbe commented:

“It’s great to see the House recognize the unfair bias in the federal tax code towards states that raise revenue through state income taxes as opposed to state sales or property taxes.”

“Broadly speaking, CSE feels it is a mistake to permit any federal tax deduction for state taxes because this creates incentives for states to tax and spend more than they would otherwise. What America really needs is to scrap the tax code and replace it with a system that is simple, fair, honest, and flat.”

“In the meantime, however, Congress needs to make sure that citizens living in states without income taxes aren’t unfairly penalized. We also recognize that the current situation creates an incentive for states to actually create an income tax because such a move would reduce the overall state and federal tax burden on their residents. For these reasons, the provision passed by the House is fair and makes sense, and we urge the Senate to pass the measure as well.”