Nothing makes paying your federal income taxes a painless exercise, but finding legal ways to minimize them sure helps.
And it’s reasonable to expect that you won’t have to pay a dime beyond your fair share.
As the April 15 filing deadline approaches, Washington taxpayers who have paid attention are feeling a little less of a sting. Those who itemize their deductions can include the state and local sales taxes they paid last year, giving them an average windfall of around $500.
This change, adopted by Congress late last year, was an overdue concession to fairness. Sales tax deductibility was eliminated 1986, inflicting fiscal discrimination upon taxpayers of the seven states – including Washington – that have sales taxes but no state income tax. The latter has remained fully deductible.
But Congress’ action last year only applied to the 2004 and 2005 tax years. Budget resolutions passed by the House and Senate this year extend the deduction through 2010 – less than the permanency Washingtonians deserve, but a step in the right direction. A joint committee now must reconcile the two resolutions, and it mustn’t monkey with sales-tax deductibility.
Washington Sen. Maria Cantwell and Rep. Brian Baird, who helped push the provision through last year, are watching closely – just in case. Cantwell last week wrote to the leaders of the conference committee urging them not to strip the deduction from the final budget.
There is good reason to believe the extension will survive: The majority leaders of both the House and Senate are from states that benefit. Still, that wasn’t enough to make the deduction permanent, so the conference committee’s deliberations shouldn’t be overlooked.
Sales tax deductibility has its detractors. A report last year from the conservative Heritage Foundation argued that it serves as an incentive for state and local governments to raise sales tax rates. We haven’t seen pressure for that here, and given the political momentum against increases in sales, business and property taxes in Washington, that’s not likely to change.
If an effort to eliminate sales tax deductibility is mounted, fairness calls for state income taxes to be part of that discussion. What’s good for one state should be good for all. Either every taxpayer in American should be able to deduct their primary state tax, or none should.
For now, enjoy your deduction and the knowledge you’re being treated fairly for the first time in nearly 20 years.