03.22.07

Senate Agrees With Cantwell, Makes Permanent Sales Tax Deduction a Budget Priority

Approved bipartisan budget provision will elevate deduction to higher priority, help ensure that permanent deduction does not increase deficit

WASHINGTON, DC - Thursday, U.S. Senators Maria Cantwell (D-WA) and Kay Bailey Hutchison (R-TX) succeeded in adding a state sales tax deduction provision to the Senate's 2008 Budget Resolution. Including the extension of this deduction in the budget blueprint is a clear signal that this legislation will be a priority for Congress this year. The approved provision also ensures that enactment of a permanent deduction will be done in a fiscally responsible way and will not add to the federal deficit. As a member of the Senate Finance Committee, which has jurisdiction over all tax issues, Cantwell will use her seat to push the deduction through Congress and into law.

"Today, the full Senate recognized what thousands of Washington families already know: Making this deduction permanent is a simple matter of tax fairness," said Cantwell. "We can do it without any more delays and in a fiscally responsible way that does not add to our deficit. A permanent deduction is one of my top priorities this year for our state, and I plan to get it signed into law."

In December of last year, Cantwell was able to get a two-year extension of the sales tax deduction passed. A permanent extension will prevent the deduction from expiring at the end of the 2007 tax year. Cantwell is committed to securing a permanent deduction well before the latest extension expires, and introduced legislation to do this on the very first day of the new 110th Congress.

The state sales tax deduction allows Washington state taxpayers who itemize to claim a federal deduction for the state and local sales taxes they pay. Taxpayers in states with an income tax can deduct the income taxes they pay. This means that without a similar deduction for sales taxes, taxpayers in states like Washington with a higher sales tax in place of state income taxes bear a disproportionate share of the tax burden.

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. Now she is championing legislation to make the deduction permanent.

To take advantage of the deduction on their 2006 federal tax returns, tax filers should obtain IRS Publication 600, which is available on the IRS website. Hard copies of this publication are also available at local IRS offices, libraries, post offices, and other locations that provide tax forms. Washingtonians who itemize their deductions can expect to save an average of $519 to $575 if they take the sales tax deduction. 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.

 

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