Conference negotiators for the House and Senate for the pending tax relief bill (HR 4250) have included a provision allowing the deductibility of sales taxes in calculating your federal income tax liability. The provision would allow people to deduct the greater of your state income tax liability or your sales tax expenditures in calculation your tax liability for 2004 and 2005.

The provision equalizes the tax treatment of citizens in 7 states without state income taxes.

Talk about putting money back in the hands of the middle class! Retroactive nonetheless.

Isn't that a bit, well, retarded? Why not eliminate the damn thing altogether and re-imburse the states for their revenue loss?

How does the state lose any revenue? This provision would allow individuals to deduct from their federal income tax liability amounts they pay to the states? Perhaps you should investigate what you are criticizing first before calling something "retarded".

Why not eliminate the damn thing altogether and re-imburse the states for their revenue loss?

See the conjunction I used: "and". So, if the states eliminate sales tax, Washington can then re-imburse them for the revenue they would lose by doing so.

Drastically reduces both paperwork and effort and helps check evasion at the same time.

Jasepl, I see what you're saying, but how would they know how much revenue they lost if no one filed tax returns?

Well different states have different tax rates. Furthermore, municipailities within each state have differing tax rates. Therefore, how would you reimburse each governmental entity for their lost revenue. If you impose a flat national sales tax (or VAT) it would result in a major tax increase for many people.

For example there is no sales tax on clothes in MN. Therefore, if you create an national VAT haven't you just raised MN's taxes?

I know that different states, counties, municipalities etc have differing tax rates and systems. We've got the same situation over here.

I'm not saying they should go for a full-on introduction of a VAT, but rather that they should look into the procedures other countries have followed when introducing a VAT.

Say a standard VAt were to be introduced. This would mean that some states would lose sales tax revenue and other states would gain (because the mean VAt rate would be highet than their original ST rate). The revenue loss would then be estimated for the affected states and they would be re-imbursed.

A similar principle can be applied withour bring VAT in. Besides, states don't determine their ST revenues based on individual returns, but on returns filed by businesses.

Oh, my fault, I was thinking this was talking about state income-tax, not sales tax. OK, now I don't understand your alternative. How would that be the same?

So what you are proposing is taking power away from the states to tax their citizenry according to local needs and instead allowing the national government to determine how much money a particular state should have and how much they should pay. From each according to their abilities, to each according to their needs. Sound familiar? Great Plan!