President Bush signed the sales tax deduction for Washington state residents back into law on Friday, potentially saving each taxpayer more than $500 a year.
The deduction was just part of a sweeping bill that rewrites corporate tax law and showers $136 billion in new tax breaks on businesses, farmers and other groups.
Sen. Maria Cantwell, D-Wash., a lead sponsor of the sales tax provision, said the deduction restores tax fairness to the state.
“This tax relief is long overdue for Washington state families, and it will pump hundreds of millions of dollars into our economy that for years have been unfairly collected by the IRS,” she said in a written statement released Friday.
The sales tax deduction won’t be automatic to residents of Washington and the six other states that have sales taxes but no state income tax. Individual taxpayers who itemize, however, will be able to take the deduction from their federal income taxes, beginning with the 2004 tax year. Details still need to be finalized, but taxpayers most likely will be allowed to use saved sales receipts or simply use a chart to determine their deduction.
Cantwell’s office said the deduction will save qualifying taxpayers an average of $300 to $500 each.
The rest of the tax bill signed by Bush has generated criticism for its corporate breaks. Announcing the action without fanfare aboard Air Force One, the White House said the new law is good for America’s workers because it will help create jobs here at home.
The election-year measure is intended to end a bitter trade war with Europe, and supporters said it provides critical assistance to beleaguered manufacturers who have suffered 2.7 million lost jobs over the past four years.
The legislation also includes about $10 billion in assistance for tobacco farmers. A Senate provision that would have coupled the assistance with regulation of tobacco by the Food and Drug Administration was dropped by the conference committee that ironed out differences between the two chambers.
Though the legislation provides new tax breaks, Congress’ Joint Committee on Taxation said it would have no impact on the federal deficit because it also closes corporate tax loopholes and repeals export subsidies.
Opponents disagree, saying it will swell the nation’s huge budget deficit with a massive giveaway that will reward multinational companies that move jobs overseas and add to the complexity of the tax system.
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