Big tax deal would make sales tax deduction permanent

A Christmas compromise on tax cuts and spending moving through Congress this week includes an item that’s been on Washingtonians’ wish lists for years.

The $1.1 trillion spending bill would make permanent a deduction for state and local sales taxes, ending more than a decade of ambiguity on the question. The plan still must be approved by the House and Senate.

“By making the state sales tax deduction a permanent part of the tax code, we end the long-term inequity for Washington taxpayers and provide certainty for the 25 percent of Washington tax filers who claim this deduction,” said Sen. Maria Cantwell, D-Wash., who introduced the legislation as a member of the Senate Finance Committee.

“This bipartisan legislation helps working families and our economy — it means an average of more than $600 back in the pockets of Washingtonians,” Cantwell said.

Washington is one of eight states without an income tax including Alaska, Florida, Nevada, South Dakota, Tennessee, Texas and Wyoming. Because taxpayers in these eight states don’t pay a state income tax, they had not been able to claim an income tax deduction on their federal tax returns.

Since 2004, Cantwell and Sen. Patty Murray, D-Wash., attempted to make the state and local sales tax deduction permanent. Last year, Cantwell secured a one-year extension of the state and local sales tax deduction for 2014 that meant taxpayers were able to claim it on their April 2015 tax returns. In 2013, the two senators co-sponsored a two-year extension of the sales tax deduction which was passed in the deal that Congress reached in averting the fiscal cliff.

“This is fantastic news for Washington state taxpayers who have faced far too much uncertainty for far too long,” said Murray. “With this deal, Washington state families will finally be treated fairly and will get the tax certainty they deserve. I’ve been fighting for this change with Senator Cantwell for years, and I am so glad that we were finally able to deliver this huge win for Washington state taxpayers in this bipartisan deal.”

House Democratic leaders were urging their rank-and-file members to oppose the compromise’s package of tax breaks for businesses and individuals, which they considered too heavily weighted toward corporations and was estimated to cost $680 billion over the next decade. They said they were still studying the spending measure.

“In my view it is practically an immorality in terms of how it damages the future,” House Minority Leader Nancy Pelosi, D-Calif., said about the tax bill.

Republicans were likely to strongly support the tax measure but lean heavily against the $1.1 trillion spending bill, which they consider too costly, meaning it will need Democratic votes to pass.

The House will vote on the tax package Thursday and the spending bill Friday. Senate passage of both measures, which the chamber’s top Democrat said he would support, would be Congress’ coda to a tumultuous 2015 that often saw Republicans at each other’s throats and the forced retirement of former Speaker John Boehner, R-Ohio.

“This compromise isn’t perfect, but it’s good,” said Senate Minority Leader Harry Reid, D-Nev. “It’s good for the American people.”