It’s as certain as death and taxes: As Congress launches a new session, Sen. Maria Cantwell and Rep. Brian Baird file bills to permanently allow Washingtonians to deduct sales taxes from their federal income tax returns.
And as they do each year, Cantwell and Baird, both Washington Democrats, face an uphill fight getting their legislation passed.
Washington is one of eight states that have no state income tax. (The others are Alaska, Florida, Nevada, South Dakota, Tennessee, Texas and Wyoming.) Between 1986 and 2004, citizens in those states effectively paid higher federal taxes than other Americans because Congress took away the sales tax deduction in a move to boost revenue.
State income taxes have long been deductible, and Congress understands the fairness issue involved. That’s why since 2004, they’ve continued voting to extend the sales-tax deduction for a year or two. Currently, it’s in force through 2009.
We’re not talking about a trivial amount of money — an average of some $600 a year for state taxpayers who itemize their deductions, according to Cantwell’s office. But with only eight states pushing the issue, political leverage is lacking. So political skill must come into play, and that will be the test for Cantwell and Baird, along with the rest of the Washington delegation and their counterparts from the other seven states. Cantwell, as a member of the Senate Finance Committee, is in a key position to move the legislation forward.
Beyond fairness, the key argument in the deduction’s favor is its stimulative effect — a strong selling point these days. Each year, it helps keep some $500 million in Washingtonians’ pockets, money they can spend to help fuel the economy. And because it has already been extended through this year, making it permanent now won’t have an immediate effect on the federal budget.
But at its core, this truly is an issue of fairness. A Washington taxpayer shouldn’t have to pay more in federal taxes than someone from another state who earns the same salary. Yet that’s what would happen if the deduction were allowed to expire.
Lawmakers who oppose the sales-tax deduction because of its cost should be willing to scrap the state-income-tax deduction as well. Since they’ll cut their own salaries before they’ll let that happen, members of Congress should take the easier path: End this annual ritual and make the sales-tax deduction permanent.
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