Tax Breaks May Not Get Extended

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The Wall Street Journal

TAX REPORT
By TOM HERMAN

Tax Breaks May Not Get Extended

Congress Hasn't Revived Option to Deduct Sales Levy Or College Fees Deduction
September 27, 2006; Page D2

Congress appears likely to leave Washington later this week without having extended several popular tax breaks that expired at the end of last year. Among them is the option to deduct state and local sales taxes, instead of state and local income taxes. This is an especially important break for people in states with no state income tax, such as Florida, Texas, Nevada and Washington, as well as many people in other states with relatively low income taxes.

Lawmakers also haven't revived two other deductions claimed by millions of people: a deduction for college tuition and fees, and a separate deduction for elementary and secondary-school teachers and other educators.

Bipartisan support for extending all three breaks appears strong. But efforts to pass "extenders" legislation have gotten stuck in congressional quicksand because of lawmakers looking to attach them to more controversial legislation, such as estate-tax cuts and a minimum-wage increase.

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Even if Congress does renew the provisions later this year, some lawmakers and IRS officials warn that delaying action that long will create major headaches for taxpayers -- and the Internal Revenue Service. Waiting until November or December to act "will cause hardship, tax-compliance problems and confusion" for millions of people, says Senate Finance Committee Chairman Charles Grassley, an Iowa Republican. Because the provisions expired at the end of last year, the IRS's draft tax forms for 2006 don't include them. If Congress extends them, those forms will have to be revised, but because of deadlines with outside printers, the IRS is "running out of time," a Senate Finance Committee staff memo says.

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