It's time to make state's sales tax deduction permanent

Every year Washington state's congressional delegation in the nation's capital must fight to ensure that state residents can deduct their state and local sales taxes on the federal income tax return.      

Every year, it comes down to last-minute tax policy negotiations, but fortunately for state residents, Sen. Maria Cantwell and her colleagues have been able to get the deduction included in tax law.

It’s time for Congress to pass Cantwell’s bill to make the sales tax deduction permanent, so Washington residents don’t have to fret every year whether they will be able to take the deduction come April 15.

We’re talking real money here.

Cantwell said in 2008, the most recent year of published IRS data, more than 860,000 Washingtonians took advantage of the deduction, reducing their taxable income by about $2 billion. That translated into nearly $500 million staying in the Washington state economy instead of going to the U.S. Treasury in tax payments.

“I hope even more Washingtonians can take advantage of the deduction this tax season,” Cantwell said. “If you itemize your deductions and take the sales tax deduction, you can expect to save an average of $500. I know in this tough economy every bit helps.”

She’s right. Tax policy should come with a degree of certainty so that taxpayers know what they face and can plan accordingly. The only path to certainty is to make the sales tax deduction permanent.

Cantwell notes that taxpayers in the 43 states with an income tax are entitled to a federal deduction for the state income taxes they pay. The deduction prevents the double taxation of funds that have already been collected by the state to finance state services.

Washington and six other states have no income tax – reconfirmed by Washington state voters last fall – so to put our citizens on par with their counterparts across the country, the state delegation has fought to ensure that state and local sales taxes are deductible.

Cantwell is quick to point out that unless the sales tax deduction is achieved, taxpayers in Washington and the other six states without an income tax bear a disproportionate share of the federal tax burden. From 1986 – when the sales tax deduction was taken away – until 2004, Washington residents paid a disproportionate share of taxes.

In 2004 lawmakers from non-income tax states waged the battle for sales tax deductions. They won. The deduction was extended for tax years 2008 and 2009 by the Emergency Economic Stabilization Act of 2008.

Late last year, you’ll remember, Congress got tied into knots over the extension of the Bush tax cuts. This state’s sales tax deduction got caught up in that debate and there was real uncertainty whether income tax filers in 2011 would be able to claim the deduction.

Tax policy compromises were struck and the final $858 billion tax package passed by Congress allows Washington residents to deduct the sales tax they paid on their 2010 and 2011 federal returns.

Whew. Another bullet dodged.

Washington residents shouldn’t have to play this waiting and watching game every year. It’s time to make the sales tax deduction permanent. As Cantwell said, “There is no reason why this sales tax deduction issue needs to be an annual legislative battle. We should make it permanent. The deduction helps our state’s working families and our region’s economy; it refunds money to Washington residents, creates jobs, and stimulates economic growth by keeping money in the state.”

Amen to that.

Read more here: http://www.theolympian.com/2011/02/21/1551235/its-time-to-make-states-sales.html#storylink=cpy