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Copyright 1999 Federal News Service, Inc.  
Federal News Service

JUNE 23, 1999, WEDNESDAY

SECTION: IN THE NEWS

LENGTH: 1426 words

HEADLINE: PREPARED STATEMENT OF
REPRESENTATIVE BRIAN BAIRD
BEFORE THE HOUSE COMMITTEE ON WAYS AND MEANS
SUBJECT - REDUCING THE TAX BURDEN

BODY:

Thank you, Mr. Chairman.
Mr. Chairman and members of the Committee, I'm honored to be here today for this extremely important hearing, and I truly appreciate the opportunity to share some specific tax concerns that have put a strain on constituents in my home state of Washington.
I'm here primarily to discuss tax fairness in the context of the federal sales tax deduction; but with the Chairman's consent, I would like to take just a moment to mention my strong support for legislation that my colleague from the state of Washington, Congresswoman Dunn, and the distinguished gentleman from Tennessee, Mr. Tanner, have introduced to repeal the estate tax. I also want to take a moment to discuss measures that I have proposed to provide relief to certain disaster victims.
Let me initially discuss the difficulties with the estate tax. In addition to some fundamental problems with the tax that seriously harm family-owned small businesses and smaller family farms, I think there are a few rarely-mentioned reasons for its repeal. One, many of the family-owned small businesses with more capital assets than covered by the exclusion employ many people at good family wages, especially within smaller communities, and often reinvest generously in those communities. Yet, far too often, the estate tax forces families to sell such businesses to larger corporate interests with less involvement in the community and less interest in maintaining a strong, well-paid local workforce.
Second, in my district, and I know that Congresswoman Dunn understands this well, we have a lot of family foresters who have been very good stewards of the land over many years. However, the estate tax may force the families of many of these land-owners to sell off all or part of that forest land before it reaches full maturity. So it is my belief that there are good labor and environmental reasons to provide additional estate tax relief.
Now, if I may return to the principle theme of my testimony, I will explain the rationale for restoring the sales tax deduction. In principle, Mr. Chairman, I believe that the federal government must strive to avoid tax policies that favor residents of some states over others. Unfortunately, I believe that one egregious failure to adhere to this principle is found in the manner in which the federal government allows taxpayers to deduct state and local taxes.
I'm sure, Mr. Chairman and members of the Committee, that you are well aware of the problem. Simply put, residents of states without state income taxes now pay a greater percentage of taxes to the federal government than residents of states with state income taxes. Solely on account of the system of taxation their state uses to collect revenues, they pay more federal tax. That differential treatment of taxpayers is a profound inequity that the 106th Congress should rectify.The repeal of the sales tax deduction in 1986, although well intended, resulted in a significant disparity between states. By disallowing state sales tax deductions, but retaining state income tax deductions in the federal code, we now have a system in which one individual with an income and financial profile that is identical to another person may pay higher taxes to the same federal government simply because they live in different states. As a result, residents of states such as Texas, Florida, Washington, Tennessee, South Dakota, Nevada, Alaska, Wyoming, and New Hampshire, pay more in federal taxes than residents of equal income in other states. In effect, residents of states without income taxes are underwriting a disproportionate share of the federal budget.
It's not that Washingtonians pay less in taxes. On the contrary, we're in the top quarter of states in amount of our personal income that goes to taxes. The question becomes, should residents of my state pay hundreds more dollars per year to the federal treasury for nothing more in return, than those individuals living across the river in another state. I believe that they should not.
To remedy this situation, I have proposed legislation, along with about 30 cosponsors, including several members of this committee, that will restore the sales tax deduction for taxpayers in states that do not have an income tax. My measure would allow taxpayers to deduct either their state income tax or state sales taxes paid in a given year. By giving a choice of deducting either sales or income tax, the budgetary scoring is kept to a minimum, but equity and fairness are restored across states.
To keep the sales tax deduction simple for taxpayers, under this legislation the Internal Revenue Service would be directed to develop standard tables for taxpayers to use in determining their average sales tax deduction. Such tables, similar to those used by taxpayers prior to 1986, would include average calculations, based upon income and household size, for a taxpayer in a given state. The bill does not restore the itemized deduction of individual purchases; it only allows taxpayers to deduct an averaged amount based on income level and family size.
I, like all of my colleagues in this body, am committed to maintaining a balanced budget, and I am also committed to the principle of equal taxation as dictated by the Constitution. But, as we wrestle with the options for spending projected budget surpluses in the foreseeable future, I ask my colleagues to put themselves in the position of more than 50 million taxpayers who live in sates with no income tax and no means of deducting sales taxes; and I ask that we prioritize the restoration of fairness for taxpayers nationwide.
So, as you review the many tax relief proposals before you today and if, in fact, the committee develops legislation to provide relief in this Congress, I strongly encourage you to consider this common-sense proposal, for the simple reason that it is the right thing to do.
Mr. Chairman, I have one final issue that I would like to bring to the committee's attention a situation in my district that warrants significant tax relief.
Since before I was sworn in as a member of this body, I have been working with a group of constituents from the City of Kelso, in my Southwest Washington district, to provide assistance to their disaster-tom community.This city has literally has been tom apart by slow-moving landslides that resulted from heavy rainfalls. During the last 14 months, more than 130 homes have been destroyed by those landslides, and the remainder of the homes in the area may suffer the same fate in the next 5 to 10 years.
What differentiates this disaster from many others is the fact that insurance was not readily available for this type of disaster - in fact, most homeowners policies specifically exclude mudslides as a covered peril - and now many of these folks have lost nearly everything they own.
Therefore, Mr. Chairman, I have devised some targeted tax measures that would assist individuals in this type of situation, in state or federally-declared disaster areas resulting from disasters for which insurance is not readily available. First, my measure would clarify the law to ensure that any discharge of debt provided to these homeowners would not be taxable as income. Second, it would establish a tax credit to help those taxpayers whose homes are destroyed, but who are required to continue paying mortgage payments on their destroyed home. Additionally, it would adjust the computation of the casualty loss deduction by allowing taxpayers to deduct the fair market value of a home, instead of only the basis in the home as permitted under current law. Finally, Mr. Chairman, in those cases where the homeowner is fortunate enough to sell a home located in such a devastated area, which may or may not have been irreparably damaged but may be severely devalued, this legislation allows taxpayers to deduct the full value of that loss.
Mr. Chairman, I would be happy to include a copy of this legislation, which I am introducing this week, with my testimony. I realize that the situation in my state may be unusual, but as such, the impact of this measure on the federal government should be limited. However, it's impact in helping to rebuild the lives of our disaster victims would be enormous.
At this point, Mr. Chairman, I would be happy to answer questions from members of the committee about any of this testimony.
Again, I want to thank you, and members of the committee for graciously granting me this opportunity, and I yield back the balance of my time.
END


LOAD-DATE: June 25, 1999




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