Thanks to a pathological preoccupation with partisanship, Congress faces a very long to-do list when it returns to work next month.
Along with negotiating how to pay for a full-year extension of the payroll-tax holiday, deciding whether to extend benefits to the long-term unemployed and keeping doctors from having their Medicare reimbursements permanently gutted, they have another important piece of financial business that went undone this year:
Allowing residents of Washington and six other states that don’t have a personal income tax to continue deducting state and local sales taxes from their federal returns.
It’s an aggravating political exercise that Washington, Florida, Nevada, South Dakota, Texas, Tennessee and Wyoming have had to endure every year or two since sales-tax deductibility was restored in 2004. Rather than the permanent deduction taxpayers in the other 43 states enjoy, we must continually fight for equal treatment.
In the recent past, sales-tax deductibility has been used as a bargaining chip for members of Congress looking for support on pet issues. This year, it may simply have been pushed aside by partisan disputes. There’s been no indication anyone is actively working to kill it.
Still, sales-tax deductibility expires on Dec. 31. If Congress fails to extend it retroactively in the new year, nearly 1 million Washington taxpayers who itemize their deductions will see their 2012 federal tax bill rise by an average of about $2,100.
(Note to taxpayers: The deduction still applies to your 2011 federal return, the one you’ll file in 2012.)
Rep. Jim McDermott (D-Seattle) is leading the renewal effort in the House, along with Rep. Kevin Brady (R-Texas). Both are members of the tax-writing Ways and Means Committee. McDermott has correctly pointed out that without the deduction, taxpayers in Washington and the other six states would shoulder a greater share of federal taxes than others.
Reasonable people may disagree about the relative fairness of our tax structure, but this much is inarguable: Residents of all states should get equal treatment.
In a perfectly fair world, sales-tax deductibility would be a given. An equally fair — and refreshingly simpler — alternative would be to disallow all deductions of state and local taxes, reducing overall federal tax rates to keep it revenue neutral.
Without that kind of sweeping reform, however, economic fairness demands that Congress renew the sales-tax deduction. When Congress returns, getting that done should be at the very top of our delegation’s agenda.
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