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Florida May Get Tax Break

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Guest Clarisa

Floridians may get federal tax break

Floridians would save an estimated $765 million a year in taxes under a proposal that allows deductions of state sales taxes. The bill is up for a vote today.


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Floridians will save as much as $765 million in annual federal income taxes by deducting state sales taxes on their federal income-tax returns as part of a massive economic package that could be passed by the U.S. House today.

The sales-tax provision would apply to 2004 and 2005 tax returns and would benefit the roughly 2.2 million Floridians who itemize deductions on their federal returns. The average Floridian pays $1,161 per year in state sales taxes, the U.S. Census Bureau reports. How much of that a taxpayer could deduct would depend on his or her tax bracket.

Gov. Jeb Bush and other Florida lawmakers have been lobbying for years for the deduction, arguing that federal tax laws unfairly penalize Floridians because residents of other states are able to deduct state income taxes. Florida is one of eight states -- others are Alaska, Texas, Tennessee, South Dakota, Nevada, Washington and Wyoming -- that do not have a state income tax.

Taxpayers in other states could choose to deduct either the state income tax or sales taxes.

''This equalizes the tax treatment,'' said Lee Arnold, general counsel for Rep. Tom Feeney, who rallied Florida lawmakers behind the bill.

''Especially given the fact that Floridians have been hit with four hurricanes, this offers some extra relief,'' said Bryan Gulley, a spokesman for Florida Democratic Sen. Bill Nelson.

Supporters of the tax bill expressed hope that the full House and Senate will approve it -- a provision of a major rewrite of corporate tax law -- before week's end.

Floridians were able to deduct sales tax before 1986.

The deduction is part of the American Jobs Creation Act of 2004. Nationally, the sales-tax provision will remove an estimated $3.2 billion from tax coffers.

Critics of the provision say it would benefit primarily high-income residents, who make up the majority of taxpayers who itemize.

Floridians pay a 6 percent sales tax expected to generate at least $17 billion in the next year.

Various estimates have placed the potential benefit to Floridians at $691 million to $765.3 million each year. However, because a significant share of sales taxes are paid by tourists those numbers could be inflated.

Arnold said there is a third way of calculating the deduction allowing Floridians to add sales taxes on big-ticket purchases such as cars or boats to the amount shown on the IRS table.

This ''is a simplified method because you won't keep every receipt for small purchases but you will keep receipts for bigger-ticket items,'' Arnold said.

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