Jan 25 2011
Her first bill of the year would make sales tax deduction permanent
WASHINGTON, D.C. – Today, on the day of the President’s State of the Union address, U.S. Senator Maria Cantwell (D-WA) introduced her first bill of the 112th Congress: bipartisan legislation that would make the state and local sales tax deduction permanent for Washingtonians. This bill allows taxpayers in states without an income tax to deduct the sales tax they pay on a permanent basis. This bill is a top priority for Cantwell because she believes a permanent deduction is warranted to ensure tax fairness and to avoid the uncertainty of ad-hoc, temporary extensions. Cantwell has fought every year since coming to the Senate to extend this deduction, and ultimately, to make it permanent.
“The state sales tax deduction is a matter of ensuring Washingtonians receive the same tax benefits as residents in other parts of the country,” said Senator Cantwell. “During this time of economic uncertainty, it’s also about keeping more hard-earned income in our pockets. This deduction means real money for real families, an average of $500 or more in the pockets of over 800,000 Washington state taxpayers. Each year that passes when this deduction is not permanent is another year that Washingtonians are denied consistent, predictable deductions they can plan around.”
The uncertainty caused by the temporary nature of the deduction has real impacts on Washington families, leading to delayed tax filings and refund checks. Although Cantwell secured an extension for the 2010 tax year during the lame-duck Congress last month, the long delay caused complications for the Internal Revenue Service (IRS), which means Washingtonians and others taxpayers who file itemized returns cannot file with the IRS until February 14th, a month later than other taxpayers. The extension Cantwell secured also applies to the 2011 tax year.
For 2008, the most recent year of published IRS data, nearly 860,000 Washingtonians took advantage of the deduction, reducing their taxable income by over $2 billion. The value of the deduction varies depending on individual filing status and tax rate, but the $2 billion in deductions translated into $500 million or more staying in the Washington state economy instead of going to the U.S. Treasury in tax payments. The state sales tax deduction increases economic growth by drawing in new businesses, creating new jobs, and keeping more money in the state. Taxpayers in Alaska, Florida, Nevada, South Dakota, Texas, and Wyoming also benefit from this deduction.
For nearly two decades, Washington taxpayers were penalized because the federal tax code did not allow deduction of state and local sales taxes. That disparity ended in 2004 when Senator Cantwell successfully restored the deduction. For the first time since 1986, taxpayers in Washington and other states that have no state income tax were able to deduct sales taxes from their federal income tax. But the extension was never made permanent, requiring repeated approval by Congress. Cantwell, a member of the Senate Finance Committee, has led the effort each year to ensure that the deduction is extended, and she has consistently introduced legislation to make the deduction permanent.