Defeat of sales tax deduction spurs new battle

Media Release

August 4, 2006

WASHINGTON, D.C. -- The Senate’s decision late Thursday to reject a $730 million annual tax break for Florida residents has prompted U.S. Senator Bill Nelson to issue a public demand that leaders in Congress act quickly on a separate bill that would restore the tax break and make it permanent.

The tax break, which expired at the end of last year, had allowed Florida residents to deduct from their federal income taxes what they paid each year in state sales tax. Residents in states with income taxes can deduct it on their federal tax returns, but Florida is one of eight states with a sales tax and no income tax.

In 2004, at the urging of Nelson and other lawmakers in sales-tax states, Congress decided to allow for the deduction of state sales taxes, but only for two years. The deduction expired last Dec. 31.

An attempt to revive it as part of a bill that also contained an increase in the minimum wage and a reduction of the estate tax failed in the Senate Thursday. The Senate rejected the controversial three-part bill, with Nelson and Florida’s other senator, Mel Martinez, voting to pass it.

“This tax break is too important to working families to not give it a high priority,” said Nelson, who has introduced stand-alone legislation with Sen. Kay Bailey Hutchison from Texas, one of the eight states where residents stand to benefit from the sales-tax break.

Nelson’s demand for immediate action came in a letter to Senate Majority Leader Bill Frist asking that the issue be considered first when the Senate returns from August recess after the Labor Day holiday. Interestingly, Frist is from Tennessee – another state affected by the bill.

If eventually approved, the sales tax deduction for Florida would be retroactive for 2006. So, Floridians should still keep their sales tax records on high-priced items, Nelson said.

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