12.09.06

Congress Approves Two-Year Extension of State Sales Tax Deduction

Cantwell hails long-overdue move; legislation heads to president’s desk to become law in time for 2006 tax filings

WASHINGTON, DC – Late Friday night, the Senate passed a two-year extension of the state sales tax deduction, a move U.S. Senator Maria Cantwell (D-WA) called critical for taxpayers in Washington state. The House of Representatives had passed the measure earlier in the evening, meaning that the package is now headed to the White House for the president’s signature. Cantwell has been working with her Senate colleagues for months to restore tax fairness for Washingtonians by extending the state sales tax deduction. However, until this week, Republican leaders had blocked these efforts, insisting that any extension be tied to controversial, unrelated legislation. The legislation approved Friday will extend the sales tax deduction for the 2006 and 2007 tax years, while also extending other tax cuts that encourage research and development and help working Washingtonians, teachers, and families saving for college.

“Extending the state sales tax deduction is long overdue,” said Cantwell. “Hundreds of thousands of families in our state will now save almost 600 dollars each, putting hard-earned cash back in their wallets. This deduction means a big boost for our state’s economy, and is absolutely critical if we’re going to ensure tax fairness for working Washingtonians. ”

The tax extenders legislation passed by Congress Friday night will extend the state sales tax deduction, the research and development tax credit, a deduction for teachers who use their own money to buy supplies for their classrooms, and a deduction for college tuition. If the package is signed into law, Washingtonians will be able to take advantage of the state sales tax deduction during the 2006 and 2007 tax years. The legislation will also undo drastic reimbursements rate cuts to physicians who treat Medicare patients. Without the reversal of these cuts, seniors will have even more trouble accessing affordable care.

Washingtonians who itemize their deductions can expect to save an average of $519 to $575. In 2003, approximately 940,000 Washingtonians itemized their tax returns. According to the Economic and Revenue Forecast Council, the deduction brings an estimated 2,000 to 3,000 jobs to Washington state and each dollar retained in the state through this deduction results in approximately 50 cents in economic stimulus. According to the Congressional Research Service, the estimated loss to state residents that would result from the expiration of this deduction totals $488 million to $541 million per year.

“An unfair tax hike is the last thing families in our state need, and that’s why it’s so important that this extension will now become law before the end of the year and during the height of the holiday shopping season,” continued Cantwell. “Now, in the new year, I’m going to focus on making this deduction permanent so that Washingtonians don’t have to wait every year to find out if they’re going to be handed a disproportionate share of America’s tax burden.”

In most states, taxpayers can deduct state income taxes from their total income taxed by the federal government. However, from 1986 until 2004, residents of states with a higher sales tax in place of state income taxes went without a deduction for sales taxes. In 2004, Cantwell worked with a bipartisan group of senators and representatives to get this deduction signed into law. Since then, Cantwell has fought continuously to extend the deduction and make it permanent.

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