Sens. Cantwell, Van Hollen Introduce Amendment to Ensure Tax Fairness, Protect Middle Class from Being Taxed Twice on Their Paychecks

Republicans want to nix state and local tax deductions to pay for massive tax breaks for wealthy, corporations

Provision would save state sales tax deduction for Washington state taxpayers

WASHINGTON, D.C. – Today, as tax reform takes center stage in Congress, U.S. Senators Maria Cantwell (D-WA) and Chris Van Hollen (D-MD) offered a provision to keep in place the State and Local Tax (SALT) deductions, protecting taxpayers from paying taxes twice on every dollar they earn.

As part of the FY2017 Budget Resolution – which sets up Republicans’ tax reform efforts – Republicans have proposed eliminating the SALT deductions for taxpayers to help pay for their massive tax cuts for corporations and the wealthy.

Currently, taxpayers pay state and local tax – whether its property, income, or sales tax – and they are able to deduct that amount from their federal income taxes. Without the SALT deductions, taxpayers would be taxed multiple times on the same income.

“State and local tax deductions have been an important way in which our taxpayers make sure they are treated fairly,” said Senator Cantwell, a senior member of the Senate Finance Committee.Our residents have come to expect these sales tax deductions and these mortgage deductions, and they want to keep them. They do not want to hear that there's a sleight of hand at the 11th hour… and then thereby have these thousands of dollars of tax increases hoisted on them. We have to have a tax discussion that is about a fair and open process, a continued dialogue about how to make sure that working families get a fair deal in a tax policy.”

“The Republican Budget and Tax Plan socks it to working Americans in countless ways, but one of the biggest impacts comes from eliminating the state and local tax deduction,” said Senator Van Hollen, who also offered this amendment in the Senate Budget Committee mark up earlier this month. “This deduction helps millions of people in Maryland and across the country – and getting rid of it will hit the pocketbooks the middle class families the hardest. It also would tie the hands of state and local governments, which provide critical services in every community across America. This is not a partisan issue, and I urge my colleagues to support this amendment. ”

The Cantwell-Van Hollen measure would create a point of order against any bill, joint resolution, motion amendment, amendment between the Houses, or conference report that would raise taxes on middle class families by double-taxing income already taxed at the state or local level.

Families from all 50 states enjoy much needed tax relief from SALT deductions. According to the Government Finance Officers Association, more than 30 percent of taxpayers benefitted from the SALT deductions, making SALT deductions a key element in in providing tax relief to middle class families. Only 21 percent of taxpayers used the deduction for mortgage interest, and 15% of tax payers used the deduction for charitable donations.

According to the IRS, more than 86 percent of taxpayers claiming SALT deductions make under $200,000 and 56 percent of taxpayers claiming the deduction make under $100,000.

About 900,000 Washington state taxpayers – or 30 percent of all Washington tax payers – took advantage of the SALT deductions in 2015, reducing their taxable income by $7,402 per individual, according to IRS data. Washington state taxpayers saved an average of $602 annually with SALT deductions.

For years, Cantwell has fought for tax fairness for Washington state taxpayers. After 1986 tax reform, Washington state residents were unable to deduct state sales taxes from their federal tax returns, while state income taxes could still be deducted. However, the state sales tax deduction was later restored on a temporary basis. For more than a decade, Sens. Cantwell and Patty Murray (D-WA) fought to extend the state and local sales tax deduction. In 2015, Cantwell and Murray were able to include a permanent state and local sales tax deduction in the tax extenders bill of 2015, meaning Washingtonians would now no longer face uncertainty on the status of their tax returns.

A copy of the amendment can be found here.