Cantwell Encourages Washingtonians to Take Advantage of State Sales Tax Deductions


WASHINGTON, D.C. – As the April 15 tax deadline approaches, U.S. Senator Maria Cantwell (D-WA) wants to remind Washington state residents to take advantage of state sales tax deductions if they itemize their federal tax returns.
“Washingtonians finalizing their 2009 tax returns should remember to deduct state sales tax if they itemize,” said Senator Cantwell, a member of the Senate Finance Committee. “Especially during these tough economic times, it’s crucial that Washingtonians are treated the same as residents in other states.   I worked hard to ensure that this provision was extended this year, and I will continue to fight to ensure this deduction is permanent.”
In 2007, the most recent year of published IRS data, more than 975,000 Washingtonians took advantage of the deduction, reducing their taxable income by $2.3 billion. That translated into nearly $500 million staying in the Washington state economy instead of going to the U.S. Treasury in tax payments. Prior to 2004, Washington taxpayers were penalized because the federal tax code did not allow deduction of state and local sales taxes the same way it did a deduction on state income taxes.
In most states, taxpayers who itemize their federal income taxes can deduct the state income taxes they paid.  The purpose of this deduction is to prevent the double taxation of funds that are used to finance state services.  However, from 1986 until 2004, residents of Washington and seven other states that have no income tax but which finance their state services using a sales tax were denied a federal deduction for these state taxes.  In 2004, Senator Cantwell successfully championed legislation that temporarily restored the deduction for state and local sales tax, providing parity in the federal income tax code for residents in those states without an income tax.  Cantwell has worked hard every year since 2004 to have this deduction renewed, and her long-term goal is to see that this deduction is made permanent.
A few weeks ago, the Senate passed the Cantwell provision to extend the state and local sales tax deduction, making it possible for Washingtonians to take this deduction next year on their 2010 federal income tax forms when the bill becomes law.  This deduction reduces the tax burden on Washington residents and stimulates economic growth by keeping money in the state.  The provision was passed as part of the American Worker, State and Business Relief Act (AWSBRA) of 2010.  AWSBRA also provided an expansion of unemployment insurance, COBRA health insurance coverage to laid-off workers, and other assistance to states.  The state and local sales tax deduction expires at the end of 2010.