01.04.07

Cantwell Makes Permanent Sales Tax Deduction Top Priority for New Congress

Cantwell introduces legislation as first act from new seat on Finance Committee

Cantwell is first Washington senator to sit on Finance Committee in more than 75 years; only one other senator from state has ever held Finance Committee post

WASHINGTON, DC – Thursday, on the first day of the new 110th Congress, U.S. Senator Maria Cantwell (D-WA) introduced as her first piece of legislation her bill to make the state sales tax deduction permanent. As a member of the Senate Finance Committee, which oversees tax-related legislation, Cantwell is well-positioned to guide her permanent sales tax deduction through Congress and into law.

“Making the sales tax deduction permanent and getting tax fairness for our state is critical for our state’s working families and our region’s economy,” said Cantwell. “A permanent deduction is one of my top priorities as I join the Senate Finance Committee. Washingtonians shouldn’t have to wait until the last minute year after year to hear if they’ll be able to benefit from the deduction, as they did in 2006. We need to make sure that families in our state get a permanent and predictable deduction that returns hard-earned cash to their wallets that they can use to cover everything from college tuition, to rising energy costs, to health care expenses.”

Cantwell’s legislation is cosponsored by Senator Patty Murray (D-WA) and Senator Bill Nelson (D-FL).

Murray said, “I am pleased that on the first day of a new session of Congress, we are working to return fairness to the tax system by introducing legislation to make the state sales tax deduction permanent. This deduction is critical to helping middle class families pay for school, cars and other major expenses. Last year alone, Washington state taxpayers saved $500 million from the state sales tax deduction. Not only does the state sales tax deduction bring much needed money into the pockets of our state’s taxpayers, but it restores equity to our tax code.”

In December of last year, Cantwell was able to get a two-year extension of the sales tax deduction passed in the final days of the 109th Congress. 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 new extension expires. The 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.

Cantwell, who was appointed in November to a seat on Senate Finance Committee, is only the second-ever senator from Washington to serve on the influential panel, and the first in more than 75 years. Senator Wesley L. Jones from North Yakima, who served in the Senate from 1909 until 1932, served on the Finance Committee during the 72nd Congress from 1931 until 1932. The first Finance Committee hearing during the new Congress is set for January 8 and will focus on an increase in the minimum wage and tax incentives for small businesses.

In most states, taxpayers can deduct state income taxes from their total income taxed by the federal government. However, 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. She also sponsored similar legislation during the previous Congress.

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 will soon be 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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