Tax Deduction Fairness Act of 1999

Summary: Tax Deduction Fairness Act of 1999 - Amends the Internal Revenue Code to allow a taxpayer to elect, when itemizing, to deduct State and local general sales taxes in lieu of State and local income taxes. Limits such deduction to a tax imposed at one rate in respect of the sale at retail of a broad range of classes of items (including food, clothing, medical supplies, and motor vehicles).

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Tax Deduction Fairness Act of 
1999''.

SEC. 2. DEDUCTION OF STATE AND LOCAL GENERAL SALES TAXES IN LIEU OF 
              STATE AND LOCAL INCOME TAXES.

    (a) In General.--Subsection (b) of section 164 of the Internal 
Revenue Code of 1986 (relating to definitions and special rules) is 
amended by adding at the end thereof the following new paragraph:
            ``(5) General sales taxes.--For purposes of subsection 
        (a)--
                    ``(A) Election to deduct state and local sales 
                taxes in lieu of state and local income taxes.--
                            ``(i) In general.--At the election of the 
                        taxpayer for the taxable year, subsection (a) 
                        shall be applied--
                                    ``(I) without regard to the 
                                reference to State and local income 
                                taxes,
                                    ``(II) as if State and local 
                                general sales taxes were referred to in 
                                a paragraph thereof, and
                                    ``(III) without regard to the last 
                                sentence.
                    ``(B) Definition of general sales tax.--The term 
                `general sales tax' means a tax imposed at one rate in 
                respect of the sale at retail of a broad range of 
                classes of items.
                    ``(C) Special rules for food, etc.--In the case of 
                items of food, clothing, medical supplies, and motor 
                vehicles--
                            ``(i) the fact that the tax does not apply 
                        in respect of some or all of such items shall 
                        not be taken into account in determining 
                        whether the tax applies in respect of a broad 
                        range of classes of items, and
                            ``(ii) the fact that the rate of tax 
                        applicable in respect of some or all of such 
                        items is lower than the general rate of tax 
                        shall not be taken into account in determining 
                        whether the tax is imposed at one rate.
                    ``(D) Items taxed at different rates.--Except in 
                the case of a lower rate of tax applicable in respect 
                of an item described in subparagraph (C), no deduction 
                shall be allowed under this paragraph for any general 
                sales tax imposed in respect of an item at a rate other 
                than the general rate of tax.
                    ``(E) Compensating use taxes.--A compensating use 
                tax in respect of an item shall be treated as a general 
                sales tax. For purposes of the preceding sentence, the 
                term `compensating use tax' means, in respect of any 
                item, a tax which--
                            ``(i) is imposed on the use, storage, or 
                        consumption of such item, and
                            ``(ii) is complementary to a general sales 
                        tax, but only if a deduction is allowable under 
                        this paragraph in respect of items sold at 
                        retail in the taxing jurisdiction which are 
                        similar to such item.
                    ``(F) Special rule for motor vehicles.--In the case 
                of motor vehicles, if the rate of tax exceeds the 
                general rate, such excess shall be disregarded and the 
                general rate shall be treated as the rate of tax.
                    ``(G) Separately stated general sales taxes.--If 
                the amount of any general sales tax is separately 
                stated, then, to the extent that the amount so stated 
                is paid by the consumer (otherwise than in connection 
                with the consumer's trade or business) to his seller, 
                such amount shall be treated as a tax imposed on, and 
                paid by, such consumer.
                    ``(H) Amount of deduction to be determined under 
                tables.--
                            ``(i) In general.--The amount of the 
                        deduction allowed by this paragraph shall be 
                        determined under tables prescribed by the 
                        Secretary.
                            ``(ii) Requirements for tables.--The tables 
                        prescribed under clause (i) shall reflect the 
                        provisions of this paragraph and shall be based 
                        on the average consumption by taxpayers on a 
                        State-by-State basis, as determined by the 
                        Secretary, taking into account filing status, 
                        number of dependents, adjusted gross income, 
                        and rates of State and local general sales 
                        taxation.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.