05.11.06

Cantwell Blasts Republican Tax Plan that Gives Breaks to Big Oil, Raises Taxes on Families and Students

Sales tax deduction left out; bill ignores tax fairness for Washington

WASHINGTON, DC – Thursday, U.S. Senator Maria Cantwell (D-WA) highlighted her objections to a Republican tax plan that continues tax breaks for big oil companies while eliminating tax cuts and credits for middle class families, students, teachers, retirement savings, and research and development. Many of these important deductions and credits were included in legislation passed earlier this year by the Senate, but were removed by Republicans working out differences between House and Senate versions of the bill. Also dropped in this final conference report was an extension of the sales tax deduction for Washington state, championed by Cantwell and approved by the Senate earlier this year. The sales tax deduction expired at the end of the 2005 tax season, making this past April’s filing the last time Washingtonians can benefit from the deduction without additional Congressional action.

“The oil and gas industry does not need more giveaways, and they certainly shouldn’t come at the expense of tax cuts like the sales tax deduction,” said Cantwell. “Instead, we should extend this deduction, provide incentives for the development of new fuel technologies, and give students and working families a fair deal.”

The five largest oil and gas companies pulled in gross profits of $287 billion in 2005. The Senate passed provisions to repeal some of the giveaways to big oil, only to see those provisions stripped from the most recent version of the legislation.

The conference report also ignores basic tax fairness for Washingtonians. In most other states, taxpayers deduct state income taxes from their total income taxed by the federal government. However, from 1986 to 2004, residents of states with a sales tax but no state income taxes were unable to take a similar deduction. In 2004, Cantwell worked with a bipartisan group of senators and representatives to pass legislation creating a sales tax deduction. The deduction expired at the end of the 2005 tax season. However, in February, on a 75-25 vote, the Senate called for making the sales tax deduction permanent. This measure is ignored in the Republican-brokered conference report, as is a two-year extension of the deduction included in the original Senate version of the legislation.

“Just months after the Senate went on record in support of a permanent deduction, it’s been dropped from this bill,” said Cantwell. “Washingtonians deserve tax fairness and a tax package that spurs innovation and creates jobs. I’ll keep fighting to make the sales tax deduction permanent and extend the R&D tax credit, college tuition deductions, and the credit for teachers who spend their own money on supplies for their students.”

The conference report:

  • Fails to extend the qualified college tuition deduction. In 2004, 6.4 million Americans used the deduction for qualified tuition and related expenses, deducting a total of $4.56 billion. Tuition and fees at four-year public colleges have increased almost 40 percent since 2001, and the average student borrower leaves school saddled with $20,000 in debt.
  • Fails to extend the saver’s credit, set to expire at the end of 2006. The saver’s credit encourages lower-income Americans to save some of their hard-earned dollars for retirement by providing a matching government contribution to individual 401(k) plans, individual retirement accounts (IRAs), and other retirement vehicles.
  • Fails to extend the educator expenses deduction, which allows teachers to deduct up to $250 in out-of-pocket expenses for books and other classroom supplies. The deduction benefited more than 3 million teachers in 2003.
  • Fails to extend the research and development tax credit, raising taxes on businesses working on innovative, cutting-edge technologies, many of which have the potential to create new jobs and bolster America’s position as a leader in the global economy.
  • Fails to extend the state sales tax deduction. In 2004, the tax cut saved Washingtonians over $500 million, with almost 850,000 taxpayers taking advantage of the deduction. The Washington State Economic and Revenue Forecast Council estimated that during 2004 and 2005, the deduction would help create 3,000 jobs and produce hundreds of millions of dollars in economic stimulus.

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