The Senate Finance Committee held a hearing Monday on tax reform and its impact on state and local tax and fiscal policy.
Among the topics covered were sales taxes on Internet purchases and downloads, and the interplay between federal, state and local taxes, including property taxes and tax-exempt bonds.
“We need to make sure our federal, state and local tax systems are working together,” said Senate Finance Committee Chairman Max Baucus, D-Mont. “As part of tax reform, we should ask how we can help states collect taxes owed and how we can encourage standard rules to protect taxpayers from multiple taxes and needless complexity.”
The hearing was the latest in a series held by the committee examining various aspects of tax reform. “As we reform the Tax Code to encourage growth and make our country more competitive, we need to ask whether the current exemptions and deductions make sense,” said Baucus. “State and local taxes could potentially be allowed as above-the-line deductions, allowing all taxpayers to benefit.”
Accountant Sanford Zinman, the owner of Zinman Accounting in White Plains, N.Y., was among the tax experts testifying. He is the national tax chair of the National Conference of CPA Practitioners and president of ncCPAp’s Westchester/Rockland New York Chapter. He noted that in his area, taxpayers are paying high levels of state and local income taxes and real estate taxes, and many of them are not receiving the federal deduction for those payments because of the alternative minimum tax. “This is troubling to many people,” he said.
Zinman also noted that many people who maintain residences in different states, such as New York and Florida, get taxed by New York on their full-year’s earnings and then it’s up to their accountant to determine how much of the wages is taxable. “Whether you’re a full-year resident or a part-time resident, you have to report your full-year revenue and the tax preparer has to break it out,” he said.
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